Schroder AsiaPacific Fund plc - RNS Submit · 2 Schroder AsiaPacific Fund plc Financial Highlights 1Source: Morningstar. 2Source: Thomson Reuters. The Company’s benchmark is the

Schroder AsiaPacific Fund plcAnnual Report and Accounts for the year ended 30 September 2016

Schroder AsiaPacific Fund plc

Investment objectiveThe Company’s principal investment objective is to achieve capital growth through investment primarily in equitiesof companies located in the continent of Asia (excluding the Middle East and Japan), together with the Far Easterncountries bordering the Pacific Ocean. It aims to achieve growth in excess of the MSCI All Countries Asia excludingJapan Index in sterling terms (Benchmark Index) over the longer term.

Investment policyThe Company principally invests in a diversified portfolio of companies located in the continent of Asia (excludingthe Middle East and Japan) (for the purposes of this paragraph the “region”). Such countries include HongKong/China, Singapore, Taiwan, Malaysia, South Korea, Thailand, India, The Philippines, Indonesia, Pakistan,Vietnam and Sri Lanka and may include other countries in the region that permit foreign investors to participate ininvesting in equities, such as in their stock markets or other such investments in the future. Investments may bemade in companies listed on the stock markets of countries located in the region and/or listed elsewhere butcontrolled from within the region and/or with a material exposure to the region.

The portfolio is predominantly invested in equities, but may also be invested in other financial instruments such asput options on indices and equities in the region. The Company does not use derivative contracts for speculativepurposes. The Company may invest up to 5% of its assets in securities which are not listed on any stock exchangebut would normally not make such an investment except where the Manager expects that the securities will shortlybecome listed on a stock exchange. In order to maximise potential returns, gearing may be employed by theCompany from time to time. Where appropriate the Directors may authorise the hedging of the Company’scurrency exposure.

Key financial highlights

NET ASSET VALUE (“NAV”)TOTAL RETURN ONE YEAR

40.9%

NAV TOTAL RETURNTHREE YEARS ANNUALISED

14.9%

NAV TOTAL RETURNFIVE YEARS ANNUALISED

14.6%SHARE PRICE TOTALRETURN ONE YEAR

41.3%

SHARE PRICE TOTALRETURN THREE YEARS

ANNUALISED

14.0%

SHARE PRICE TOTALRETURN FIVE YEARS

ANNUALISED

13.9%BENCHMARK TOTALRETURN ONE YEAR

36.6%

BENCHMARK TOTALRETURN THREE YEARS

ANNUALISED

11.7%

BENCHMARK TOTALRETURN FIVE YEARS

ANNUALISED

9.4%

Strategic Report

Financial Highlights 2

Ten-Year Financial Record 3

Chairman’s Statement 4

Manager’s Review 6

Investment Portfolio 10

Strategic Review 12

Governance

Board of Directors 18

Report of the Directors 20

Report of the Audit Committee 25

Statement of Directors’ Responsibilities 27

Remuneration Report 28

Financial

Independent Auditors’ Report 31

Income Statement 35

Statement of Changes in Equity 36

Statement of Financial Position 37

Notes to the Accounts 38

Annual General Meeting

Annual General Meeting – Explanation of Special Business 52

Notice of Annual General Meeting 53

Explanatory Notes to the Notice of Meeting 54

Shareholder Information Inside back cover

Schroder AsiaPacific Fund plc 1

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Total returns (including dividends reinvested) for the year ended 30 September 2016 2015Net asset value (“NAV”) per share1 40.9% (2.7)%Share price1 41.3% (5.7)%Benchmark2 36.6% (6.0)%

Shareholders’ funds, NAV per share, share price and share price discount at 30 September 2016 2015 % changeShareholders’ funds (£’000) 658,321 477,870 37.8Ordinary shares in issue 167,795,716 169,225,716 (0.8)NAV per share 392.33p 282.39p 38.9Ordinary share price 343.00p 246.50p 39.1Share price discount 12.6% 12.7%

Revenue for the year ended 30 September 2016 2015 % change

Net revenue return after taxation (£’000) 8,040 7,151 12.4Revenue return per share 4.77p 4.23p 12.8Dividends per share 4.75p 4.20p 13.1

Gearing3 0.4% 2.3%

Ongoing Charges4 1.10% 1.03%

2 Schroder AsiaPacific Fund plc

Financial Highlights

1Source: Morningstar.2Source: Thomson Reuters. The Company’s benchmark is the MSCI All Countries Asia excluding Japan Index in sterling terms.3Borrowings used for investment purposes, less cash, expressed as a percentage of net assets. 4Ongoing Charges represents the management fee and all other operating expenses excluding finance costs and transaction costs, expressed as a percentage of the averagedaily net asset values during the year.


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Ten-Year Financial Record

Ten-year performance

At 30 September 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Shareholders’ funds (£’000) 335,763 224,321 307,435 388,113 307,280 395,340 455,024 495,527 477,870 658,321

NAV per share, diluted where

applicable (pence) 200.83 134.17 183.88 224.76 210.16 266.64 268.13 292.82 282.39 392.33

Share price (pence) 179.00 113.00 166.75 203.75 190.75 236.75 240.70 264.00 246.50 343.00

Gearing/(net cash) (%)1 7.4 4.0 (0.8) (3.7) 4.4 5.7 (3.3) (0.6) 2.3 0.4

Year ended 30 September 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Net revenue after

taxation (£’000) 2,497 4,160 4,469 4,394 4,033 4,916 5,000 4,749 7,151 8,040

Net return per share (pence) 1.49 2.49 2.67 2.62 2.59 3.37 3.08 2.80 4.23 4.77

Dividends per share (pence) 1.50 2.40 2.65 2.65 2.75 3.35 3.35 2.75 4.20 4.75

Ongoing Charges (%)2 1.27 1.18 1.32 1.22 1.15 1.18 1.10 1.08 1.03 1.10

1Gearing/(net cash) represents borrowings used for investment purposes, less cash, expressed as a percentage of net assets.2Ongoing Charges represents the management fee and all other operating expenses excluding finance costs and transaction costs, expressed as a percentage of theaverage daily net asset values during the year. The figures for 2011 and prior years represent the expenses calculated as above, expressed as a percentage of the average month end net asset values during the year.

30-Sep-06 30-Sep-07 30-Sep-08 30-Sep-09 30-Sep-10 30-Sep-11 30-Sep-12 30-Sep-13 30-Sep-14 30-Sep-15 30-Sep-16

50

100

150

200

250

300

350

400

NAV total return Share price total return Benchmark total return

Source: Morningstar/Thomson Reuters. Rebased to 100 at 30 September 2006.


Investment performanceThe year to 30 September 2016 has been an exceptional year for the Company, with both its net asset value andshare price reaching hitherto unseen levels. The net asset value produced a total return of 40.9% (2015: negativetotal return of 2.7%) compared to the benchmark total return of 36.6%, the outperformance attributable to bothasset allocation and stock selection. The share price produced a total return of 41.3% (2015: negative total returnof 5.7%). While these returns can largely be attributed to the weakness of sterling in the aftermath of the result ofthe UK referendum on EU membership, performance has also benefited from pockets of opportunity in Asianmarkets. This performance continues the excellent long-term record and it remains ahead of the benchmark indexover one, three, five and ten years.

A more detailed comment on performance and investment policy may be found in the Manager’s Review.

Final dividendThe Directors recommend the payment of a final dividend of 4.75 pence per share for the year ended30 September 2016. Net revenue after taxation has increased by 12.4% from £7,151,000 to £8,040,000 (withincome received from investments contributing to the increase), and a similar percentage increase in the dividendfrom that paid to shareholders in respect of the previous financial year is proposed. If the resolution proposed at theAnnual General Meeting to pay a final dividend is passed, the dividend will be paid on 1 February 2017 toshareholders on the Register on 30 December 2016.

Gearing policyDuring the year, the Company’s level of gearing has remained relatively modest, starting at 2.3% at thecommencement of the year and at 0.4% at its close. The Company’s gearing continues to operate within pre-agreed limits so that net effective gearing does not represent more than 20% of shareholders’ funds.

Discount managementAt the Company’s last Annual General Meeting, the Company was given the authority to purchase up to 14.99% ofits issued share capital. The Board utilised this authority during the year to purchase 1,430,000 shares as part of itsefforts to actively manage the level of discount at which the Company’s shares trade. In the Board’s view,monitoring the discount, and consideration of whether to make purchases of the ordinary shares, should take placeon a regular basis. It therefore proposes that this authority be renewed at the forthcoming Annual General Meeting.Any shares so purchased would be cancelled or held in Treasury for potential reissue.

Over the last year, the longer term target maximum discount level was again set at approximately 10% and thediscount traded roughly in line with this target (the average discount being 11.3% over the year).

The Board continues to believe that it is not necessarily in the best interests of shareholders as a whole to adopt arigid discount control mechanism that seeks to target a defined maximum discount level regardless of marketconditions. Instead the Board continues to follow a more flexible strategy that takes into account the level ofdiscount at which the Company’s peer group trades as well as the absolute level of its own discount and prevailingmarket conditions.

The Board and successionThe Board has adopted a new policy on succession and refreshment. This policy has been designed to ensure thatthe Board achieves a diverse balance of skills, experience, background and gender which is appropriately refreshedover time and remains capable of overseeing the Company’s strategic direction and adopted business model.

Chairman’s Statement

Nicholas Smith

The Board believes that it is important for appropriate new skills to be brought to the Board and will look to refreshone Director every two to three years. A Director will serve for a period of more than nine years only in exceptionalcircumstances. All Directors will be subject to re-election every year at the Annual General Meeting.

With regards to the Chairman, the Board is of the view that while experience of the Company is a key requirement,it would not be beneficial to the Company for the Chairman to serve for extended periods. Therefore, should aserving Director be subsequently appointed as Chairman, such appointment would take effect for an initial term offive years. Any further term would be considered on a case by case basis and would depend on overall length ofservice and the prevailing circumstances of the Company at that time.

The Board currently has five members. Anthony Fenn, the Senior Independent Director, will retire at the AGM inJanuary 2018, having delayed his retirement by one year to assist me in the early term of my appointment. TheBoard will commence a recruitment process for Anthony’s successor in 2017 and expects to make an appointmentlater in the year.

OutlookFive months ago, with the half year results, I mentioned that one important goal for the Company was for the shareprice to break out of the range it has been in for the last three years. That has happened, albeit largely from the EUreferendum’s effect on sterling. It is always pleasing to see the share price reaching a new all-time high during theyear, although volatility following Trump’s victory has seen some recent pull back.

Currency movements apart, can Asia now take up the running? The region’s corporate sectors increasingly looksplit into two. On the one hand, there is a core of shareholder-focused management, continued opportunities as theregion’s middle class grows, and new technologies to exploit. On the other hand, there are a number of poorly runbusinesses, too many industries contaminated by their government, and exporters stuck with low-growth endmarkets. It’s a different environment from one where high economic growth made most companies successful, andone where even more pressure is on the Manager to find the right opportunities. We believe that the Company’strack record over the last two decades should offer shareholders comfort on this.

Annual General MeetingThe Annual General Meeting will be held on Wednesday, 25 January 2017 at 12.00 noon and shareholders areencouraged to attend. As in previous years, Matthew Dobbs, on behalf of the Manager, will give a presentation onthe prospects for Asia and the Company’s investment strategy.

Nicholas SmithChairman

12 December 2016


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The net asset value per share of the Company recorded a total return of 40.9% over the 12 months to endSeptember 2016. This was ahead of the performance of the benchmark, the MSCI All Countries Asia ex JapanIndex, which was up 36.6% over the same period.

Performance of the MSCI AC Asia ex Japan Index30 September 2015 to 30 September 2016

Source: Thomson Reuters as at 30 September 2016

The scale of returns over the year has been materially influenced by the weakness of sterling in response to theuncertainty caused by the EU referendum result. This somewhat disguised the extent to which regional marketsmade steady progress in local currency terms over the second half of the fiscal year.

Much of this represented a recovery from the very severe falls seen in the summer of 2015. More tangible supporthas come from continued accommodative monetary policies worldwide. This has been mirrored in the region, withreductions in policy rates in Korea, India and China. Concerns over the direction of the Chinese renminbi exchangerate and dwindling foreign currency reserves were soothed by concerted policy action including a restructuring oflocal government debt, proactive interest rate cuts and discouragement of capital outflows. Credit has continued toexpand, resulting in a stabilisation in growth and a recovery in commodity prices.

Country returns – 30 September 2015 to 30 September 2016

Source: Factset

Sep 15 Oct 15 Nov 15 Dec 15 Jan 16 Feb 16 Mar 16 Apr 16 May 16 Jun 16 Jul16 Aug 16 Sep 16

85

90

95

100

105

110

115

120

125

130

135

140

MSCI AC Asia ex Japan USD MSCI AC Asia ex Japan GBP

Indonesia

Taiwan

Korea

Thailand

Hong Kong

MSCI AC Asia ex JP

China

Malaysia-EM

Singapore

Philippines

India

Returns in GBP Returns in Local currency

79.537.1

44.317.8

42.213.3

41.415.8

38.919.2

36.614.1

32.013.3

32.06.5

28.05.3

25.011.2

23.87.7

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Indonesia has been the strongest market thanks to a recovery in commodity prices, a stabilisation in the rupiah andincreasing confidence in the reform agenda of President Jokowi. Korea and Thailand benefited from an upturn incorporate earnings revisions, while Hong Kong was supported by the stabilisation in China and the overspill ofmainland liquidity into the property and stock markets.

In contrast, Singapore yielded subpar returns with key financial and offshore and marine stocks out of favour, thePhilippines reflected policy uncertainty following the election of maverick Duterte to the Presidency, and Indiaconsolidated following previous strong performance. Although Chinese growth has stabilised, the overall index hasbeen hampered by its heavy weighting towards State Owned Enterprises, where national policy dictates havepriority over shareholder returns, while the private sector remains under pressure.

Performance and portfolio activityThe return on the Company’s portfolio has been significantly ahead of the benchmark. The primary contribution hascome from stock selection with significant value added in China, Taiwan and Hong Kong, along with lesser impact fromthe Philippines, Indonesia and Korea. The main detractors have been selection in India and Thailand; in both cases ourholdings in the telecom sector reflected adverse developments in terms of regulation and competitive intensity.

Country attribution – top 3 contributors and top 3 detractors30 September 2015 to 30 September 2016

Source: Factset

In terms of allocation, modest gearing aided relative performance given the underlying rise in markets, along withthe overweighting in Thailand and underweight stances in Singapore and China. Partial offset came from theunderweighting of Korea and Indonesia, and the overweight position in India.

In terms of portfolio adjustments over the year, exposures in Hong Kong and India have been reduced, funding anaddition to Korea (although the portfolio remains underweight) and to a more modest degree in China and Taiwan.In sector terms we have reduced financials and consumer staples and added to energy, materials and informationtechnology.

Total contribution (%)

China

Taiwan

Hong Kong

Indonesia

ThailandIndia -1.2

-1.2

-0.2

1.1

1.9

3.2

Manager’s Review


Outlook and policyThe prospects for global growth remain somewhat muted. Policy settings are likely to remain supportive, thoughwhether the concentration on monetary tools gives way to greater fiscal activism remains to be seen. Headwinds togrowth include still elevated levels of indebtedness, limited pricing power and generally low levels of private capitalinvestment. A number of major industries such as energy, financials and auto manufacturing are facing potentiallydestabilising levels of disruption, further contributing to caution. This is as true within the region as elsewhere.

On top of all this, recent events in the United States and the United Kingdom point to the febrile politicalatmosphere. The big worry for the region is the potential reversal in the trend of globalisation and integration onwhich the all important trade and investment flows depend. Amid the obvious uncertainty, however, we believepragmatism and the realities of economic self-interest will prevail.

Meanwhile, events in China will remain very influential for investor sentiment. Structural issues remain, with theprivate sector cutting investment and conserving cash, while the government-influenced parts of the economy arebeing encouraged to invest, primarily in infrastructure and other "priority" projects. The sources of this funding havebecome increasingly opaque, the latest mechanism being the encouragement of public-private partnerships (PPPs)with return on investment considerations likely to be subordinate to other aims such as sustaining growth andemployment. Despite poor affordability, particularly in the major cities, we also see little appetite to seriously disruptthe real estate market.

The continued expansion of credit in excess of nominal growth is clearly not sustainable, but given the priority forsocial cohesion and the leadership transition in prospect in 2017, stability is the priority rather than inherently riskyrestructuring and capital discipline, however desirable they may be. While we continue to see the situation in Chinaas the main source of domestic risk facing the region, we expect relative stability over the next year given a modestrecovery in growth, a steady decline in the currency, and further credit growth enabled by low nominal interestrates, high household savings and government direction.

Regional equity valuations have partially recovered the steep falls seen in the second half of 2015. They are notexpensive by historic standards, but earnings expansion is likely to remain modest given the global backdrop andsubdued demand drivers across the region. The latter continues to be a function of relatively high aggregate debtlevels compared to history, although in general they are well below those pertaining in developed markets, includingthe United Kingdom.

However, the aggregate position disguises the variations at a sector, market and stock level. Looking at our ownportfolio, we see many companies that have (rightly in our view) been cautious and disciplined about investmentspending, preferring to conserve cash and retire debt. Consequently, many companies are lowly geared, andgenerating excess cash. Absent some sort of severe economic dislocation, we feel a fully invested stance remainsjustified.

Manager’s Review

Country weights

Net Asset Value Weightings (%) Benchmark Index Weight (%)

Market 30-Sep-16 30-Sep-15 30-Sep-16

Hong Kong 25.9 29.6 12.3

China 19.9 18.5 31.4

Korea 12.7 8.5 17.3

Taiwan 14.7 12.6 14.1

Singapore 3.4 3.9 4.5

Malaysia – – 3.1

Indonesia 2.7 1.6 3.2

Thailand 3.5 5.9 2.6

Australia/New Zealand 0.6 0.3 –

India 12.1 16.8 9.9

Philippines 1.4 2.5 1.6

Other* 3.5 2.1 –

Other net assets -0.4 -2.3 –

Total 100.0 100.0 100.0

Source: Schroders, 30 September 2016.*Sri Lanka, Vietnam, UK

Schroder Investment Management Limited

12 December 2016

Securities shown are for illustrative purposes only and should not be viewed as a recommendation to buy or sell.


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Investments are classified by the Manager in the country of their main business operations. Stocks in bold are the20 largest investments, which by value account for 57.3% (2015: 53.1%) of total investments.

Investment PortfolioAt 30 September 2016

£’000 % £’000 %

CHINA

Tencent Holdings1 36,598 5.5

Alibaba2 ADR 24,219 3.7

China Pacific Insurance1 14,436 2.2

China Mobile1 12,895 1.9

Baidu2 ADR 9,422 1.4

China Lodging2 ADR 8,181 1.2

Belle International1 7,931 1.2

NetEase2 ADR 7,834 1.2

Hangzhou HIK-Vision Digital warrants 7,802 1.2

Sands China1 7,280 1.1

New Oriental Education2 ADR 5,924 0.9

Sina1 5,136 0.8

China Petroleum & Chemical1 4,818 0.7

Shandong Weigao1 2,543 0.4

Midea warrants 2,126 0.3

Hollysis Automation Technologies2 1,918 0.3

Weibo2 ADR 349 0.1

TOTAL CHINA 159,412 24.1

HONG KONG

Jardine Strategic3 30,173 4.6

AIA 28,522 4.3

Fortune Real Estate Investment Trust 17,907 2.7

Hong Kong Land3 12,663 1.9

Kerry Properties 12,343 1.9

Techtronic Industries 10,350 1.6

Swire Properties 8,820 1.3

Johnson Electric 6,759 1.0

BOC Hong Kong 6,712 1.0

HKT Trust and HKT 6,209 0.9

PCCW 5,599 0.8

Hopewell 4,603 0.7

Dah Chong Hong 1,852 0.3

Texwinca 1,160 0.2

Chow Sang Sang 1,096 0.2

TOTAL HONG KONG 154,768 23.4

INDIA

Reliance Industries4 18,909 2.9

Maruti Suzuki India 13,438 2.0

Gujarat Pipavav Port 12,743 1.9

Apollo Hospitals Enterprise 10,173 1.6

Zee Entertainment Enterprises 8,493 1.3

Eicher Motors 7,964 1.2

Container of India 4,746 0.7

Multi Commodity Exchange of India 3,032 0.5

Oracle Financial Services 213 –

TOTAL INDIA 79,711 12.1

THAILAND

Intouch 10,428 1.6

Bangkok Bank NVDR 7,487 1.1

LPN Development 5,105 0.8

TOTAL THAILAND 23,020 3.5

INDONESIA

Bank Mandiri 11,938 1.8

United Tractor 6,097 0.9

TOTAL INDONESIA 18,035 2.7

AUSTRALIA

BHP Billiton 12,883 1.9

Iluka Resources 3,765 0.6

TOTAL AUSTRALIA 16,648 2.5

SINGAPORE

Singapore Telecommunications 9,600 1.5

TOTAL SINGAPORE 9,600 1.5

PHILIPPINES

Ayala Land 4,964 0.8

Holcim Philippines 4,614 0.7

TOTAL PHILIPPINES 9,578 1.5


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Investment PortfolioAt 30 September 2016

£’000 %

TAIWAN

Taiwan Semiconductor 48,934 7.4

Hon Hai Precision Industries 12,299 1.9

Largan Precision 10,119 1.5

Far Eastone Telecomm 9,883 1.5

Asustek Computers 7,928 1.2

Delta Electronics Industrial 7,472 1.1

TOTAL TAIWAN 96,635 14.6

KOREA

Samsung Electronics 25,298 3.8

Hyundai Motor Company 11,906 1.8

NCSoft 9,049 1.4

Naver 8,839 1.3

Medy-Tox 7,446 1.1

SK Telecom 6,817 1.1

LG Chemical 6,596 1.0

Samsung SDI 3,320 0.5

Amorepacific preference shares 2,833 0.4

Samsung Electronics preference shares 1,542 0.2

TOTAL KOREA 83,646 12.6

£’000 %

VIETNAM

Dragon Capital Vietnam Enterprise Investments 5,591 0.8

TOTAL VIETNAM 5,591 0.8

SRI LANKA

John Keells5 4,761 0.7

TOTAL SRI LANKA 4,761 0.7

TOTAL INVESTMENTS6 661,405 100.0

1 Listed in Hong Kong.2 Listed in the USA.3 Listed in Singapore.4 Includes a holding of GDR.5 Includes a holding of warrants.6 Total investments comprises equities, preferences shares and warrants.


Business modelThe Company carries on business as an investment trust. It has been approved by HM Revenue & Customs as aninvestment trust in accordance with Section 1158 of the Corporation Tax Act 2010, by way of a one-off applicationand it is intended that the Company will continue to conduct its affairs in a manner which will enable it to retain thisstatus.

The Company is domiciled in the UK and is an investment company within the meaning of Section 833 of theCompanies Act 2006. The Company is not a close company for taxation purposes.

It is not intended that the Company should have a limited life but the Directors consider it desirable that theshareholders should have the opportunity to review the future of the Company at appropriate intervals. Accordingly,the Articles of Association contain provisions requiring the Directors to put a proposal for the continuation of theCompany to shareholders at the Annual General Meeting (“AGM”) in 2021 and thereafter at five yearly intervals.

The Company’s business model may be demonstrated by the diagram below.

Investment objective and policyDetails of the Company’s investment objective and policy may be found on the inside front cover.

The Board has appointed the Manager, Schroder Unit Trusts Limited, to implement the investment strategy and tomanage the Company’s assets in line with the appropriate restrictions placed on it by the Board, including limits onthe type and relative size of holdings which may be held in the portfolio and on the use of gearing, cash, derivativesand other financial instruments as appropriate.

GearingThe Company utilises a £50 million multi-currency revolving credit facility with Scotiabank of which US$27.3 million(£21.0 million) was drawn down at the year end. In addition, the Company has a £30 million multi-currencyoverdraft facility with HSBC which was not utilised during the year. The Board has set parameters within which theManager is authorised to use the credit facilities and draw down funds.

While the Articles of Association limit the amount of gearing the Company may have to a maximum of theCompany’s adjusted capital and reserves, Directors do not anticipate net effective gearing levels in excess of 20%of shareholders’ funds.

• Responsible for overall strategy andoversight includingrisk management

• Activities centredon the creation of shareholder value

InvestorValue

• Manager implementsthe investment strategyby following an investment process

• Support by strongresearch and riskenvironment

• Regular reporting and interaction with the Board

Investment

• Set objectives,strategy and KPIs

• Appoint Manager and other service providers to achieveobjectives

• Oversee portfolio management

• Monitor achievementof KPIs

• Oversee the use of gearing

• Oversee discount management

Strategy

• Marketing and salescapability of theManager

• Support from the Corporate Broker withsecondary market intervention to supportthe discount

Promotion

Board is focused onensuring:

• that the feesand Ongoing Charges remaincompetitive

• that the vehicleremains attractiveto investors

CompetitivenessBoard

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Investment processStock selection is at the heart of the investment approach. A key strength of the Manager is its network of analystsin the region whose focus is on identifying companies able to grow shareholder value in the long-term. Although thein-house analysts are the primary source of stock ideas, the portfolio manager also generates stock ideas throughhis own research and draws on a number of other sources including a proprietary quantitative screen, sell-sideanalysts, other investment professionals within Schroders and his own contacts in the market. A country allocationprocess is carried out on a monthly basis, combining the output of a proprietary quantitative model and thequalitative views of the portfolio manager.

Stock researchThe majority of analysis is done using internal research and company valuation models. The analysts typically usestandard formats to construct models and to forecast company earnings which have been developed by the globalresearch team. This means that outputs from the models are standardised so that differences in accountingregimes are as far as possible eliminated and that comparisons can be made between companies in the sameindustry across the region or globally.

Stock gradings reflect a balance between analysts’ view of the quality of the company and its fair value in themarketplace, and their level of conviction.

Stock selection/portfolio constructionFrom these inputs the portfolio manager assesses the fundamental characteristics of the stocks with a particularfocus on companies with visible earnings growth, sustainable returns and valuation support, and ranks themaccording to a view of upside/downside potential and the level of conviction he has in the investment view.

Weightings within the portfolio reflect these considerations, with the primary objective being to create a portfolio withan appropriate level of stock-specific risk as the primary driver of returns. While much of the portfolio construction isfounded on the portfolio manager’s skill and intuition, he also harnesses the Manager’s proprietary risk managementsystem, Portfolio Risk Investment Strategy Manager (PRISM), to provide a quantitative view of the characteristics ofthe portfolio. The portfolio manager also sets, in conjunction with the Board, the gearing of the portfolio.

Investment restrictions and spread of riskThe key restrictions imposed on the Manager are that: (a) no more than 15% of the Company’s total net assets, atthe date of acquisition, may be invested in any one single company; (b) no more than 10% of the Company’s totalnet assets, at the date of acquisition, may be invested in other listed investment companies unless such companieshave a stated investment policy not to invest more than 15% of their gross assets in other listed investmentcompanies; (c) the Company will not invest more than 15% of its gross assets in other listed investment companiesor investment trusts; (d) no more than 15% of the Company’s total net assets may be invested in open-endedfunds; and (e) no more than 25% of the Company’s total net assets may be invested in the aggregate of unlistedinvestments and holdings representing 20% or more of the equity capital of any company.

The Investment Portfolio on pages 10 and 11 demonstrates that, as at 30 September 2016, the Company held 69investments spread over multiple countries and in a range of industry sectors. The largest investment, TaiwanSemiconductor represented 7.4% of total investments at 30 September 2016. At the end of the year, the Companydid not hold any unlisted investments, open-ended funds or real estate investment trusts. The Board believes thatthe objective of spreading risk has been achieved in this way.

PromotionThe Company promotes its shares to a broad range of investors which have the potential to be long-term supportersof the investment strategy. The Company seeks to achieve this through its Manager and Corporate Broker, whichpromote the shares of the Company through regular contact with both current and potential shareholders.

Promotion is focused via three channels:

– Discretionary fund managers. The Manager promotes the Company via both London and regional teams. Thismarket is the largest channel by a significant margin.

Strategic Review


– Execution-only investors. The Company promotes its shares via engaging with platforms and through itswebsite. Volume is smaller but platforms have experienced strong growth in recent times and are an importantfocus for the Manager.

– The Company also promotes its shares to institutional investors.

The Board also seeks active engagement with investors and meetings with the Chairman are offered to professionalinvestors where appropriate. These activities consist of investor lunches, one-on-one meetings, regional roadshows and attendances at conferences for professional investors. In addition, the Company’s shares are supportedby the Manager’s wider marketing of investment companies targeted at all types of investors; this includesmaintaining close relationships with adviser and execution-only platforms, advertising in the trade press, maintainingrelationships with financial journalists and the provision of digital information on Schroders’ website.

Details of the Board’s approach to discount management may be found in the Chairman’s Statement on page 4and in the Explanation of Special Business at the AGM on page 52.

Key performance indicatorsThe Board measures the development and success of the Company’s business through achievement of theCompany’s investment objective which is considered to be the principal key performance indicator for the Company.

The Board continues to review the Company’s Ongoing Charges to ensure that the total costs incurred byshareholders in the running of the Company remain competitive when measured against peer group funds. Ananalysis of the Company’s costs, including management fees, Directors’ fees and general expenses, is submitted toeach Board meeting. The management fee is reviewed at least annually.

Corporate and Social ResponsibilityBoard diversityAs at 30 September 2016, the Board comprised four men and one woman. Candidates for Board vacancies areselected based on their skills and experience, which are matched against the balance of skills and experience ofthe overall Board taking into account the specific criteria for the role being offered. Candidates are not specificallyselected on the grounds of their gender but this is taken into account when the Board examines its overall balance,skill set and experience.

Responsible investment policyThe Company delegates to its Manager the responsibility for taking environmental, social and governance (“ESG”)issues into account when assessing the selection, retention and realisation of investments. The Board expects theManager to engage with investee companies on social, environmental and business ethics issues and to promotebest practice. The Board expects the Manager to exercise the Company’s voting rights in consideration of theseissues.

A description of the Manager’s policy on these matters can be found on the Schroders website atwww.schroders.com/ri. The Board notes that Schroders believes that companies with good ESG managementoften perform better and deliver superior returns over time. Engaging with companies to understand how theyapproach ESG management is an integral part of the investment process. Schroders is compliant with the UKStewardship Code and its compliance with the principles therein is reported on its website.

The Board monitors the implementation of this policy through regular reporting by the Manager on its engagementactivity, how it is integrated into the investment process, and the outcomes of the activity.

Anti-bribery and corruption policyThe Company continues to be committed to carrying out its business fairly, honestly and openly and continues tooperate an anti-bribery policy.

Greenhouse gas emissionsAs the Company outsources its operations to third parties, it has no greenhouse gas emissions to report.

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Principal risks and uncertaintiesThe Board is responsible for the Company’s system of risk management and internal control and for reviewing itseffectiveness. The Board has adopted a detailed matrix of principal risks affecting the Company’s business as aninvestment trust and has established associated policies and processes designed to manage and, wherepossible, mitigate those risks, which are monitored by the Audit Committee on an ongoing basis. This systemassists the Board in determining the nature and extent of the risks it is willing to take in achieving its strategicobjectives. Both the principal risks and the monitoring system are also subject to robust review at least annually.The last review took place in November 2016.

Although the Board believes that it has a robust framework of internal control in place this can provide onlyreasonable, and not absolute, assurance against material financial misstatement or loss and is designed tomanage, not eliminate, risk.

A summary of the principal risks and uncertainties faced by the Company which have remained unchangedthroughout the year, and actions taken by the Board and, where appropriate, its Committees, to manage andmitigate these risks and uncertainties, is set out below.

Risk Mitigation and management

Strategic risk

Investment management risk

Financial and currency risk

Custody risk

Appropriateness of the Company’s investment remit periodically reviewed andsuccess of the Company in meeting its stated objectives is monitored.

Share price relative to net asset value monitored and use of buy backauthorities considered on a regular basis.

Marketing and distribution activity is actively reviewed.

Ongoing competitiveness of all service provider fees subject to periodicbenchmarking against competitors.

Annual consideration of management fee levels.

The Company’s investment objectivesmay become out of line with therequirements of investors, resulting in awide discount of the share price tounderlying net asset value.

The Company’s cost base couldbecome uncompetitive, particularly inlight of open ended alternatives.

Review of the Manager’s compliance with the agreed investment restrictions,investment performance and risk against investment objectives and strategy;relative performance; the portfolio’s risk profile; and appropriate strategiesemployed to mitigate any negative impact of substantial changes in markets.

Annual review of the ongoing suitability of the Manager.

The Manager’s investment strategy, ifinappropriate, may result in the Companyunderperforming the market and/or peergroup companies, leading to theCompany and its objectives becomingunattractive to investors.

Risk profile of the portfolio considered and appropriate strategies to mitigateany negative impact of substantial changes in markets or currency discussedwith the Manager.

Board considers the overall hedging policy on a regular basis.

The Company is exposed to the effect ofmarket fluctuations due to the nature ofits business. A significant fall in regionalequity markets or a substantial currencyfluctuation could have an adverse impacton the market value of the Company’sunderlying investments.

Depositary reports on safe custody of the Company’s assets, including cashand portfolio holdings, are independently reconciled with the Manager’s records.

Review of audited internal controls reports covering custodial arrangements.

Annual report from the Depositary on its activities, including matters arising fromcustody operations.

Safe custody of the Company’s assetsmay be compromised through controlfailures by the Depositary, includingcyber hacking.

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Risk Mitigation and management

Gearing and leverage risk

Accounting, legal and regulatory risk

Service provider risk

Risk assessment and internal controlsRisk assessment includes consideration of the scope and quality of the systems of internal control operatingwithin key service providers, and ensures regular communication of the results of monitoring by such providers tothe Audit Committee, including the incidence of significant control failings or weaknesses that have beenidentified at any time and the extent to which they have resulted in unforeseen outcomes or contingencies thatmay have a material impact on the Company’s performance or condition. No significant control failings orweaknesses were identified from the Audit Committee’s ongoing risk assessment which has been in placethroughout the financial year and up to the date of this Report.

A full analysis of the financial risks facing the Company is set out in note 19 on pages 46 to 51.

Gearing is monitored and strict restrictions on borrowings imposed: gearingcontinues to operate within pre-agreed limits so as not to exceed 20% ofshareholders’ funds in cash or cash equivalents.

The Company utilises credit facilities.These arrangements increase the fundsavailable for investment throughborrowing. While this has the potentialto enhance investment returns in risingmarkets, in falling markets the impactcould be detrimental to performance.

Confirmation of compliance with relevant laws and regulations by key serviceproviders.

Shareholder documents and announcements, including the Company’spublished Annual Report, are subject to stringent review processes.

Procedures have been established to safeguard against disclosure of insideinformation.

In order to continue to qualify as aninvestment trust, the Company mustcomply with the requirements of Section1158 of the Corporation Tax Act 2010.

Breaches of the UK Listing Rules, theCompanies Act or other regulations withwhich the Company is required tocomply, could lead to a number ofdetrimental outcomes.

Service providers appointed subject to due diligence processes and withclearly-documented contractual arrangements detailing service expectations.

Regular reporting by key service providers and monitoring of the quality ofservices provided.

Review of annual audited internal controls reports from key service providers,including confirmation of business continuity arrangements.

The Company has no employees andhas delegated certain functions to anumber of service providers. Failure ofcontrols and poor performance of anyservice provider could lead to disruption,reputational damage or loss.

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Viability statementThe Directors have assessed the prospects of the Company over a five year period, which it considers to be anappropriate timeframe over which to judge the viability of an investment trust company, taking into account thefactors outlined below.

In its assessment of the viability of the Company, the Directors have considered each of the Company’s principalrisks and uncertainties detailed on pages 15 and 16 and in particular the impact of a significant fall in regional equitymarkets on the value of the Company’s investment portfolio. The Directors have also considered the Company’sincome and expenditure projections and the fact that the Company’s investments comprise readily realisablesecurities which can be sold to meet funding requirements if necessary, and on that basis consider that five years isan appropriate time period.

Based on the Company’s processes for monitoring operating costs, the Board’s view that the Manager has theappropriate depth and quality of resource to achieve superior returns in the longer term, the portfolio risk profile,limits imposed on gearing, counterparty exposure, liquidity risk and financial controls, the Directors have concludedthat there is a reasonable expectation that the Company will be able to continue in operation and meet its liabilitiesas they fall due over the five year period of their assessment, subject to passing of the continuation vote to be putto Shareholders at the Annual General Meeting in 2021.

Going concernHaving assessed the principal risks and the other matters discussed in connection with the viability statement setout above, and the “Guidance on Risk Management, Internal Control and Related Financial and BusinessReporting” published by the Financial Reporting Council in 2014, the Directors consider it appropriate to adopt thegoing concern basis in preparing the accounts.

By Order of the Board

Schroder Investment Management LimitedCompany Secretary

12 December 2016

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Nicholas Smith

Status: Independent Non-ExecutiveChairmanLength of service: 6 years, appointeda Director in May 2010 and Chairman inJanuary 2016Experience: Mr Smith joined theJardine Fleming Group in 1986 in HongKong serving, from 1993, as ChiefFinancial Officer and as a member ofthe Executive Committee. Afterreturning to the UK, Mr Smith becamea director of Robert FlemingInternational Ltd in 1998 and theDirector of Origination – InvestmentBanking serving until 2000. Mr Smithcurrently serves as Chairman ofAberdeen New Thai Investment TrustPLC, and is a non-executive Director ofJP Morgan European SmallerCompanies Trust plc.Committee membership: Audit,Management Engagement andNomination Committees (Chairman ofthe Nomination Committee)Current remuneration: £40,000 perannum (with effect from 1 October2016)Connections with the Manager: NoneMaterial interests in any contractwhich is significant to theCompany’s business: NoneShared Directorships with any otherDirectors of the Company: NoneElected/last re-elected: 2014

Keith Craig

Status: Independent Non-ExecutiveDirector Length of Service: 1 year, appointed aDirector in May 2015Experience: Mr Craig served with theBritish Army after university andsubsequently joined the Swire Group inHong Kong and Manila in the 1980sand early 90s. He was then a diplomatwith the Foreign & CommonwealthOffice for some years before movingback to Asia as a stockbroker,establishing WI Carr’s business in thePhilippines and subsequently runningtheir global equity sales and tradingoperation, based in Hong Kong. Hereturned to London and joined Hakluyta strategic intelligence company in2000.Committee membership: Audit,Management Engagement andNomination CommitteesCurrent remuneration: £28,000 perannum (with effect from 1 October2016)Connections with the Manager: NoneMaterial interests in any contractwhich is significant to theCompany’s business: NoneShared Directorships with any otherDirectors of the Company: NoneElected/last re-elected: 2016

Anthony Fenn

Status: Senior IndependentNon-Executive DirectorLength of Service: 11 years,appointed a Director in June 2005 andSenior Independent Director in January2016Experience: Mr Fenn retired at the endof 2003 after 38 years as an InvestmentExecutive with Sun Life Financial ofCanada. He held various positions inthe course of his career and was for thelast 6 years Head of Investments, Asia.Before moving to Asia he was ChiefInvestment Officer for the UK andoversaw the setting up of Sun Life’sinvestment management subsidiarythere. He also has investmentexperience in Hong Kong, Japan,China, Indonesia, India, and thePhilippines.Committee membership: Audit,Management Engagement andNomination Committees (Chairman ofthe Management EngagementCommittee)Current remuneration: £28,000 perannum (with effect from 1 October2016)Connections with the Manager: NoneMaterial interests in any contractwhich is significant to theCompany’s business: NoneShared Directorships with any otherDirectors of the Company: NoneElected/last re-elected: 2016

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Rosemary Morgan

Status: Independent Non-ExecutiveDirectorLength of Service: 4 years, appointeda Director in July 2012Experience: Ms Morgan studiedJapanese at university in Australia,Japan and the US and worked as aJapanese equity fund manager for 16years at John Govett before joining theinstitutional client team at Fidelity. Shewas at RBS from mid-2007 where shemanaged long only and alternative fundsof funds specialising in Japan, thePacific Basin and Emerging Markets.The team moved to Aberdeen AssetManagement in February 2010 and sheretired in March 2012. She is a Directorof JPMorgan Indian Investment Trustplc, a Trustee of the London LibraryPension Fund and a Director of theLandau Forte Charitable Trust.Committee membership: Audit,Management Engagement andNomination Committees (Chairman ofthe Audit Committee)Current remuneration: £33,000 perannum (with effect from 1 October2016)Connections with the Manager: NoneMaterial interests in any contractwhich is significant to theCompany’s business: NoneShared Directorships with any otherDirectors of the Company: NoneElected/last re-elected: 2016

James Williams

Status: Independent Non-ExecutiveDirector Length of Service: 2 years, appointeda Director in August 2014Experience: Mr Williams worked for18 years in the investment bankingindustry for ING Barings, ABN AMROand Commerzbank Securities includingsenior roles in Hong Kong, Bangkokand London. After leavingCommerzbank Securities in 2005 hebecame a partner at Saginaw CapitalLLP until 2008. He is currently aDirector of a private Hong Kong basedinvestment company.Committee membership: Audit,Management Engagement andNomination CommitteesCurrent remuneration: £28,000 perannum (with effect from 1 October2016)Connections with the Manager: NoneMaterial interests in any contractwhich is significant to theCompany’s business: NoneShared Directorships with any otherDirectors of the Company: NoneElected/last re-elected: 2015

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The Directors submit their Report and the audited financial statements of the Company for the year ended30 September 2016.

Revenue and dividend The net revenue return for the year, after finance costs and taxation, was £8,040,000 (2015: £7,151,000),equivalent to a revenue return per ordinary share of 4.77 pence (2015: 4.23 pence).

The Board has recommended the payment of a final dividend for the year ended 30 September 2016 of 4.75p pershare (2015: 4.20p) payable on 1 February 2017 to shareholders on the register on 30 December 2016, subject toapproval by shareholders at the Annual General Meeting on Wednesday, 25 January 2017.

Directors and their interestsThe Directors of the Company and their biographical details can be found on pages 18 and 19. All Directors heldoffice throughout the year under review. Details of Directors’ share interests in the Company are set out in theRemuneration Report on page 30.

Notwithstanding the provisions of the Company’s Articles of Association and the UK Corporate Governance Codein respect of the periodic re-election of Directors, the Board considers that shareholders should be given theopportunity to vote on the re-election of all of its members on an annual basis. Accordingly, all of the Directors willretire at the forthcoming Annual General Meeting (“AGM”) and, being eligible, offer themselves for re-election.

Re-appointment as a Director is not automatic and follows a formal process of evaluation of each Director’sperformance and Directors who have served for more than six years are subject to particulary rigorous assessmentof their independence and contribution.

The Board does not believe that length of service, by itself, necessarily affects a Director’s independence ofcharacter or judgement and Directors who have served on the Board for more than nine years may still offerthemselves for re-election at the AGM. The Board has assessed the independence of all Directors. All Directors areconsidered to be independent in character and judgement.

The Board, having taken all relevant matters into account, considers that all Directors continue to demonstratecommitment to their roles, provide valuable contributions to the deliberations of the Board, and remain free fromconflicts with the Company and its Directors. It therefore recommends that shareholders vote in favour of theirre-election.

Share capitalAs at the date of this Report, the Company had 167,570,716 ordinary shares of 10p in issue. No shares were heldin Treasury. Accordingly, the total number of voting rights in the Company at the date of this Report is 167,570,716.Details of changes to the Company’s share capital during the year under review are given in note 13 to theaccounts on page 44.

Substantial share interestsAs at the date of this Report, the Company has received notifications in accordance with the Financial ConductAuthority’s (“FCA”) Disclosure Guidance and Transparency Rule 5.1.2R of the following interests in 3% or more ofthe voting rights attaching to the Company’s issued share capital.

Number of Percentage ofordinary shares total voting rights

Investec Wealth & Investment Ltd 22,054,508 13.16City of London Investment Management Ltd 19,947,171 11.90Lazard Asset Management LLC 13,328,472 7.95Aberdeen Asset Managers Ltd 11,043,455 6.59Schroders plc 8,483,022 5.06Wells Capital Management, Inc. 8,461,325 5.04

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Key service providersThe Board has adopted an outsourced business model and has appointed the following key service providers:

ManagerThe Company is an Alternative Investment Fund as defined by the AIFM Directive and has appointed Schroder UnitTrusts Limited (“SUTL”) as the Manager in accordance with the terms of an Alternative Investment Fund Manager(“AIFM”) Agreement. The AIFM Agreement, which is governed by the laws of England and Wales, can be terminatedby either party on 12 months’ notice or on immediate notice in the event of certain breaches or the insolvency ofeither party. As at the date of this Report no such notice had been given by either party.

SUTL is authorised and regulated by the FCA and provides portfolio management, risk management, accountingand company secretarial services to the Company under the AIFM Agreement. The Manager also provides generalmarketing support for the Company and manages relationships with key investors, in conjunction with theChairman, other Board members or the corporate broker as appropriate. The Manager has delegated investmentmanagement, accounting and company secretarial services to another wholly owned subsidiary of Schroders plc,Schroder Investment Management Limited. The Manager has in place appropriate professional indemnity cover.

The Schroders Group manages £375 billion (as at 30 September 2016) on behalf of institutional and retail investors,financial institutions and high net worth clients from around the world, invested in a broad range of asset classesacross equities, fixed income, multi-asset and alternatives.

The Manager is entitled to a fee of 0.95% per annum on the first £100 million of assets, 0.90% per annum on thenext £200 million, 0.85% per annum on the next £100 million and 0.80% per annum on assets in excess of £400million. The fee continues to be charged on the value of the Company’s assets under management, net of currentliabilities other than short-term borrowings.

The Manager is also entitled to receive a fee of £97,000 for secretarial services provided to the Company for theyear ended 30 September 2016 (2015: £96,000). The fee continues to be subject to annual adjustment in line withchanges in the Retail Prices Index.

Details of amounts payable to the Manager are set out in note 16 on pages 45 and 46 of this Report.

The Board has reviewed the performance of the Manager during the year under review and continues to considerthat it has the appropriate depth and quality of resource to deliver superior returns over the longer term. TheManager is supported by significant depth of knowledge and experience in Asia, with regional resources and localanalysts. Thus, the Board considers that the Manager’s appointment under the terms of the AIFM Agreement,details of which are set out above, is in the best interests of shareholders as a whole.

DepositaryHSBC Bank plc, which is authorised by the Prudential Regulation Authority and regulated by the FCA and thePrudential Regulation Authority, carries out certain duties of a Depositary specified in the AIFM Directive including, inrelation to the Company, as follows:

• safekeeping of the assets of the Company which are entrusted to it;• cash monitoring and verifying the Company’s cash flows; and• oversight of the Company and the Manager.

The Company, the Manager and the Depositary may terminate the Depositary Agreement at any time by giving90 days’ notice in writing. The Depositary may only be removed from office when a new Depositary is appointed bythe Company.



Corporate Governance StatementThe Board is committed to high standards of corporate governance and has implemented a framework forcorporate governance which it considers to be appropriate for an investment trust in order to comply with theprinciples of the UK Corporate Governance Code. The Financial Reporting Council published a revised version ofthe UK Corporate Governance Code in September 2014 (the “Code”) which applies to accounting periodsbeginning on or after 1 October 2014 and the disclosures in this Statement report against its provisions. The Codeis published by the UK Financial Reporting Council and is available to download from www.frc.org.uk.

The Board has noted the publication of a further revised UK Corporate Governance Code in April 2016, whichapplies to financial years beginning on or after 17 June 2016. This latest update has been driven by theimplementation of the EU’s Audit Regulation and Directive and its impact on audit committees and the Board isconsidering the Company’s governance framework in light of the new provisions.

Compliance statementThe UK Listing Authority requires all UK listed companies to disclose how they have complied with the provisions ofthe Code. This Corporate Governance Statement, together with the Statement of Directors’ Responsibilities onpage 27 and the Viability Statement and Going Concern Statement set out on page 17, indicate how the Companyhas complied with the Code’s principles of good governance and its requirements on internal control.

The Board believes that the Company has, throughout the year under review, complied with all relevant provisionsset out in the Code.

Operation of the BoardChairmanThe Chairman is an independent non-executive Director who is responsible for leadership of the Board andensuring its effectiveness in all aspects of its role. The Chairman’s other significant commitments are detailed onpage 18. He has no conflicting relationships.

Role and operation of the BoardThe Board is the Company’s governing body; it sets the Company’s strategy and is collectively responsible toshareholders for its long-term success. The Board is responsible for appointing and subsequently monitoring theactivities of the Manager and other service providers to ensure that the investment objectives of the Companycontinue to be met. The Board also ensures that the Manager adheres to the investment restrictions set by theBoard and acts within the parameters set by it in respect of any gearing.

A formal schedule of matters specifically reserved for decision by the Board has been defined and a procedureadopted for Directors, in the furtherance of their duties, to take independent professional advice at the expense ofthe Company.

The Chairman ensures that all Directors receive relevant management, regulatory and financial information in atimely manner and that they are provided, on a regular basis, with key information on the Company’s policies,regulatory requirements and internal controls. The Board receives and considers reports regularly from the Managerand other key advisers and ad hoc reports and information are supplied to the Board as required.

The Board is satisfied that it is of sufficient size with an appropriate balance of diverse skills and experience,independence and knowledge of the Company, its sector and the wider investment trust industry, to enable it todischarge its duties and responsibilities effectively and that no individual or group of individuals dominates decisionmaking.

Training and developmentOn appointment, Directors receive a full, formal and tailored induction. Directors are also regularly provided with keyinformation on the Company’s policies, regulatory and statutory requirements and internal controls. Changesaffecting Directors’ responsibilities are advised to the Board as they arise. Directors also regularly participate in



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relevant training and industry seminars. Training and development needs are included as part of the evaluationprocess and are agreed with the Chairman.

Conflicts of interestThe Board has approved a policy on Directors’ conflicts of interest. Under this policy, Directors are required todisclose all actual and potential conflicts of interest to the Board as they arise for consideration and approval. TheBoard may impose restrictions or refuse to authorise such conflicts if deemed appropriate.

Board evaluationIn order to review the effectiveness of the Board, the Committees and the individual Directors, a thoroughevaluation process is in place. This is implemented by way of a questionnaire and discussions with the Chairman. Inrespect of the Chairman himself, discussions are held between the Directors and the Senior Independent Director.The process is considered by the Board to be constructive in terms of identifying areas for improving thefunctioning and performance of the Board and the Committees, the contribution of individual Directors and buildingand developing individual and collective strengths. An evaluation is currently being undertaken.

Directors’ and officers’ liability insurance and indemnityDirectors’ and officers’ liability insurance cover was in place for the Directors throughout the year. The Company’sArticles of Association provide, subject to the provisions of UK legislation, an indemnity for Directors in respect ofcosts which they may incur relating to the defence of any proceedings brought against them arising out of theirpositions as Directors, in which they are acquitted or judgment is given in their favour by the Court. This indemnitywas in place throughout the year under review and to the date of this report.

Directors’ attendance at meetingsFour Board meetings are usually scheduled each year to deal with matters including: the setting and monitoring ofinvestment strategy; approval of borrowings and/or cash positions; review of investment performance, the level ofdiscount of the Company’s shares to underlying net asset value, and promotion of the Company and servicesprovided by third parties. Additional meetings of the Board are arranged as required. On a one-off basis, the Boardmeeting usually held annually in September was held in October and as a result only three Board meetings wereheld during the year under review.

The number of meetings of the Board and its committees held during the financial year and the attendance ofindividual Directors is shown below. Whenever possible all Directors attend the AGM.

ManagementNomination Audit Engagement

Director Board Committee Committee Committee

Nicholas Smith 3/3 1/1 2/2 1/1

Keith Craig 3/3 1/1 2/2 1/1

Anthony Fenn 3/3 1/1 2/2 1/1

Rosemary Morgan 3/3 1/1 2/2 1/1

James Williams 3/3 1/1 2/2 1/1

The Hon. Rupert Carington1 2/2 0/1 1/1 1/1

1Retired as a Director on 28 January 2016. The Hon. Rupert Carington did not attend the Nomination Committee at which the appointment of his successor asChairman was considered.

The Board is satisfied that the Chairman and each of the other non-executive Directors commits sufficient time tothe affairs of the Company to fulfil their duties as Directors.

Relations with shareholdersShareholder relations are given high priority by both the Board and the Manager. The Company communicates withshareholders through its webpage and the Annual Report which aims to provide shareholders with a clearunderstanding of the Company’s activities and its results.

The Chairmen of the Board and its committees, as well as the Senior Independent Director, attend the AGM andare available to respond to queries and concerns from shareholders.



It is the intention of the Board that the Annual Report and Notice of the AGM be issued to shareholders so as toprovide at least 20 working days’ notice of the AGM. Shareholders wishing to lodge questions in advance of theAGM are invited to do so by writing to the Company Secretary at the address given on the outside back cover.

The Company has adopted a policy on complaints and other shareholder communications which ensures thatshareholder complaints and communications addressed to the Company Secretary, the Chairman or the Board are,in each case, considered by the Chairman and the Board.

CommitteesIn order to assist the Board in fulfilling its governance responsibilities, it has delegated certain functions toCommittees. The roles and responsibilities of these Committees, together with details of work undertaken duringthe year under review, is outlined over the next few pages.

The Committees of the Board have defined Terms of Reference which are available on the webpagewww.schroderasiapacificfund.com. Membership of the Committees is set out on pages 18 and 19.

Nomination CommitteeThe Nomination Committee is responsible for succession planning bearing in mind the balance of skills, knowledge,experience and diversity existing on the Board and will recommend to the Board when the further recruitment ofnon-executive Directors is required. The Nomination Committee aims to maintain a balance of relevant skills,experience and length of service of the Directors serving on the Board, taking gender and other diversity factorsinto account.

Before the appointment of a new Director, the Nomination Committee prepares a description of the role andcapabilities required for a particular appointment. While the Committee is dedicated to selecting the best candidatefor the role, the Board also recognises the importance of diversity. The Board agrees that its members shouldoverall possess a range of experience, knowledge, professional skills and personal qualities as well as theindependence necessary to provide effective oversight of the affairs of the Company. These qualities are taken intoaccount in considering the appointment of a new Director. The Board does not consider it appropriate or to be inthe interests of shareholders as a whole to establish prescriptive diversity targets.

Candidates are drawn from suggestions put forward either from recommendation from within the Company or bythe use of an external agency. Candidates are then interviewed by members of the Committee, which makes arecommendations to the Board.

To discharge its duties the Nomination Committee met once during the year to consider its Terms of Reference andBoard balance, skills and succession planning, including the appointment of a successor Chairman and theappointment of a new Audit Committee Chairman and Senior Independent Director. The Hon. Rupert Carington didnot participate in discussions regarding the appointment of his successor.

Management Engagement CommitteeThe role of the Management Engagement Committee is to ensure that the Manager remains suitable to manage theportfolio, that the management contract is competitive and reasonable for the shareholders, and that the Companymaintains appropriate administrative and company secretarial support. The Committee also reviews the servicesprovided by other service providers. All Directors are members of the Management Engagement Committee whichis chaired by Mr Fenn. The Board considers each member of the Committee to be independent.

The Management Engagement Committee met on one occasion during the year under review and considered itsTerms of Reference, the performance and ongoing suitability of the Manager, the terms and conditions of the AIFMAgreement, the performance and suitability of other service providers, and fees paid to Directors.

By Order of the Board

Schroder Investment Management LimitedCompany Secretary

12 December 2016



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The responsibilities and work carried out by the Audit Committee in the year under review are set out in thefollowing report. The duties and responsibilities of the Committee may be found in the Terms of Reference whichare available on the webpage dedicated to the Company. Membership of the Committee is as set out on pages 18and 19. The Board has satisfied itself that at least one of the Committee’s members has recent and relevantfinancial experience.

The Audit Committee met twice during the year ended 30 September 2016. The Audit Committee discharged itsresponsibilities by:

• considering its Terms of Reference; • reviewing the operational controls maintained by the Manager and Depositary; • reviewing the Half Year and Annual Report and Accounts and related audit plan and engagement letter; • reviewing the need for an internal audit function; • reviewing the independence of the Auditors; • evaluating the Auditors’ performance; and • reviewing the principal risks faced by the Company and the system of internal control.

Annual report and financial statementsDuring its review of the Company’s financial statements for the year ended 30 September 2016, the AuditCommittee considered the following significant issues, including consideration of principal risks and uncertainties inlight of the Company’s activities, and issues communicated by the Auditors during its reporting:

As a result of the work performed, the Committee has concluded that the Annual Report for the year ended30 September 2016, taken as a whole, is fair, balanced and understandable and provides the informationnecessary for shareholders to assess the Company’s position, performance, business model and strategy, and hasreported on these findings to the Board. The Board’s conclusions in this respect are set out in the Statement ofDirectors’ Responsibilities on page 27.

Effectiveness of the independent audit processThe Audit Committee evaluated the effectiveness of the independent audit firm and process prior to making arecommendation on its re-appointment at the forthcoming AGM. This evaluation involved an assessment of theeffectiveness of the Auditors’ performance against agreed criteria including: qualification; knowledge, expertise andresources; independence policies; effectiveness of audit planning; adherence to auditing standards; and overallcompetence. As part of the evaluation, the Committee considered feedback from the Manager on the auditprocess and the year end report from the Auditors, which details compliance with regulatory requirements, on

Issue considered How the issue was addressed

• Valuation and existence of holdings • Review of portfolio holdings and assurance reports oncontrols from the Manager and Depositary.

• Overall accuracy of the Annual Report and Accounts • Consideration of the draft Annual Report and Accountsand the letter from the Manager in support of the letter ofrepresentation to the Auditor.

• Calculation of the investment management fee • Consideration of methodology used to calculate the fee,matched against the criteria set out in the AIFMAgreement.

• Internal controls and risk management • Consideration of several key aspects of internal control andrisk management operating within the Manager andDepositary.

• Compliance with the investment trust qualifying rules ins1158 of the Corporation Tax Act 2010

• Consideration of the Manager’s report confirmingcompliance.

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safeguards that have been established, and on their own internal quality control procedures. The members of theCommittee also met the Auditors without representatives of the Manager present.

Representatives of the Auditors attend the Audit Committee meeting at which the draft Annual Report andAccounts is considered. Having reviewed the performance of the Auditors as described above, the Committeeconsidered it appropriate to recommend the firm’s re-appointment.

The Auditor is required to rotate the Senior Statutory Auditor every five years. This is the fourth year that the SeniorStatutory Auditor has conducted the audit of the Company’s financial statements.

PricewaterhouseCoopers LLP has provided audit services to the Company from its incorporation in 1995 to date.The Statutory Auditors and Third Country Regulations 2016 (the “Regulations”) were published on 17 June 2016and take effect for financial periods commencing on or after that date. The Audit Committee is reviewing the impactof the Regulations on the Company’s current policies, noting that they include mandatory periodic rotation of theAuditor and re-tendering of the audit contract. PricewaterhouseCoopers LLP must be replaced as the Company’sAuditor before commencement of the audit in 2024, and the Audit Committee will put the audit contract out totender before that date.

There are no contractual obligations restricting the choice of external auditors.

Independent AuditorsPricewaterhouseCoopers LLP have indicated their willingness to continue in office. Accordingly, resolutions tore-appoint PricewaterhouseCoopers LLP as auditors to the Company, and to authorise the Directors to determinetheir remuneration will be proposed at the AGM.

Provision of information to the AuditorsThe Directors at the date of approval of this Report confirm that, so far as each of them is aware, there is norelevant audit information of which the Company’s Auditors are unaware; and each Director has taken all the stepsthat he or she ought to have taken as a Director in order to make himself or herself aware of any relevant auditinformation and to establish that the Company’s Auditors are aware of that information.

Provision of non-audit servicesThe Audit Committee has reviewed the FRC’s Guidance on Audit Committees and has formulated a policy on theprovision of non-audit services by the Company’s Auditors. The Audit Committee has determined that theCompany’s appointed Auditors will not be considered for the provision of certain non-audit services, such asaccounting and preparation of the financial statements, internal audit and custody. The Auditors may, if required,provide other non-audit services however, and this will be judged on a case-by-case basis.

The Auditors have provided taxation compliance services to the Company during the year, for which they received afee of £2,000 (2015: £2,000).

Internal auditThe Company does not have an internal audit function; it delegates to third parties most of its operations and doesnot employ any staff. The Audit Committee will continue to monitor the system of internal control in order to provideassurance that it operates as intended and the Directors will continue to annually review whether an internal auditfunction is needed.

Rosemary MorganAudit Committee Chairman

12 December 2016

Report of the Audit Committee


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The Directors are responsible for preparing the Annual Report, the Strategic Report, the Report of the Directors, theCorporate Governance Statement, the Remuneration Report and the financial statements in accordance withapplicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law theDirectors have prepared the financial statements in accordance with United Kingdom Generally AcceptedAccounting Practice (United Kingdom Accounting Standards, comprising Financial Reporting Standard (FRS) 102“The Financial Reporting Standard applicable in the UK and Republic of Ireland” and applicable law). Undercompany law the Directors must not approve the financial statements unless they are satisfied that they give a trueand fair view of the state of affairs of the Company and of the return or loss of the Company for that period. Inpreparing these financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;• make judgments and accounting estimates that are reasonable and prudent;• state whether applicable UK Accounting Standards, comprising FRS 102, have been followed, subject to any

material departures disclosed and explained in the financial statements;• notify the Company’s shareholders in writing about the use of disclosure exemptions in FRS 102, used in the

preparation of the financial statements; and• prepare the financial statements on a going concern basis unless it is inappropriate to presume that the

Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain theCompany’s transactions and disclose with reasonable accuracy at any time the financial position of the Companyand enable them to ensure that the financial statements and the Remuneration Report comply with the CompaniesAct 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonablesteps for the prevention and detection of fraud and other irregularities.

The Manager is responsible for the maintenance and integrity of the webpage dedicated to the Company.Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differfrom legislation in other jurisdictions.

Each of the Directors, whose names and functions are listed on pages 18 and 19, confirm that to the best of theirknowledge:

• the financial statements, which have been prepared in accordance with United Kingdom Generally AcceptedAccounting Practice (United Kingdom Accounting Standards and applicable law), give a true and fair view of theassets, liabilities, financial position and net return of the Company;

• the Strategic Report contained in the Report and Accounts includes a fair review of the development andperformance of the business and the position of the Company, together with a description of the principal risksand uncertainties that it faces; and

• the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides theinformation necessary for shareholders to assess the Company’s position and performance, business modeland strategy.

By order of the Board


12 December 2016

Statement of Directors’ Responsibilities


Introduction This Report has been prepared in accordance with the relevant provisions of the Companies Act 2006 and theLarge and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013.

The following Remuneration Policy is currently in force and is subject to a binding vote every three years. The nextvote will take place at the AGM in 2017 and the current policy provisions will apply until that date. An ordinaryresolution to approve the Remuneration Policy will be put to shareholders at the forthcoming AGM (no changes areproposed). In addition, the below Directors’ Annual Report on Remuneration is subject to an annual advisory vote.An ordinary resolution to approve this Report will be put to shareholders at the forthcoming AGM.

At the AGM held on 30 January 2014, 99.77% of the votes cast (including votes cast at the Chairman’s discretion)in respect of approval of the Remuneration Policy were in favour, while 0.23% were against. 146,392 votes werewithheld.

At the AGM held on 28 January 2016, 99.75% of the votes cast (including votes cast at the Chairman’s discretion)in respect of approval of the Report on Remuneration for the year ended 30 September 2015 were in favour, while0.25% were against. 104,782 votes were withheld.

Directors’ Remuneration PolicyThe determination of the Directors’ fees is a matter dealt with by the Board and the Management EngagementCommittee.

It is the Board’s policy to determine the level of Directors’ remuneration having regard to amounts payable tonon-executive directors in the industry generally, the role that individual directors fulfil in respect of Board andCommittee responsibilities, and time committed to the Company’s affairs taking into account the aggregate level offees set out in the Company’s Articles of Association. This aggregate level of fees is currently set at £200,000 perannum and any increase in this level requires approval by the Board and the Company’s shareholders. TheChairman of the Board and the Chairman of the Audit Committee each receive fees at a higher rate than the otherDirectors to reflect their additional responsibilities. Directors’ fees are set at a level to recruit and retain individuals ofsufficient calibre, with the level of knowledge, experience and expertise necessary to promote the success of theCompany in reaching its short and long-term strategic objectives.

The Board and its Committees exclusively comprise non-executive Directors. No Director past or present has anentitlement to a pension, and the Company has not and does not intend to operate a share scheme for Directors orto award any share options or long-term performance incentives to any Director. No Director has a service contractwith the Company. However Directors have a letter of appointment. Directors do not receive exit payments and arenot provided with any compensation for loss of office. No other payments are made to Directors other than thereimbursement of reasonable out-of-pocket expenses incurred in attending to the Company’s business.

The terms of Directors’ letters of appointment are available for inspection at the Company’s registered officeaddress during normal business hours and during the AGM at the location of such meeting.

The Board did not seek the views of shareholders in setting this Remuneration Policy. Any comments on the Policyreceived from shareholders would be considered on a case-by-case basis.

As the Company does not have any employees, no employee pay and employment conditions were taken intoaccount when setting this Remuneration Policy and no employees were consulted in its construction.

Directors’ fees are reviewed annually and take into account research from third parties on the fee levels of directorsof peer group companies, as well as industry norms and factors affecting the time commitment expected of theDirectors. New Directors are subject to the provisions set out in this Remuneration Policy.

Remuneration Report


Directors’ annual Report on RemunerationThis Report sets out how the Directors’ remuneration policy was implemented during the year ended 30 September2016.

Fees paid to DirectorsDuring the year ended 30 September 2016, the Chairman was paid a fee of £35,000 and the other members of theBoard were each paid a fee of £25,000. The Chairman of the Audit Committee received an additional fee of £3,000.

The following amounts were paid by the Company to the Directors for services as non-executive Directors inrespect of the year ended 30 September 2016 and the previous financial year:

Fees Taxable benefits1 Total

2016 2015 2016 2015 2016 2015

Director £ £ £ £ £ £

Nicholas Smith2 32,753 28,000 227 211 32,980 28,211

Robert Binyon3 – 8,168 – 9,418 – 17,586

The Hon. Rupert Carington4 12,519 35,000 – 193 12,519 35,193

Keith Craig5 25,000 9,224 – – 25,000 9,224

Anthony Fenn 25,000 25,000 – 182 25,000 25,182

Rosemary Morgan 27,031 25,000 83 137 27,114 25,137

James Williams 25,000 25,000 – 257 25,000 25,257

Total 147,303 155,392 310 10,398 147,613 165,790

1Comprises amounts reimbursed for expenses incurred in carrying out business for the Company, which have been grossed up to include NI contributions.2Appointed Chairman on 28 January 2016.3Retired on 28 January 2015. Mr Binyon was resident in Thailand throughout his tenure as a Director of the Company and his taxable benefits included travelling expenses incurred in attending Board meetings in London.

4Retired on 28 January 2016.5Appointed on 19 May 2015.

The information in the above table has been audited.

Consideration of matters relating to Directors’ remunerationDirectors’ remuneration was last reviewed by the Management Engagement Committee and the Board inNovember 2016. The members of the Board at the time that remuneration levels were considered were as set outon pages 18 and 19 of this Annual Report. Although no external advice was sought in considering the levels ofDirectors’ fees, information on fees paid to Directors of other investment trusts managed by Schroders and peergroup companies provided by the Manager and corporate broker was taken into consideration.

Following the annual review, the Board agreed that the fees paid to the Chairman would increase to £40,000 perannum, the fees paid to the Audit Committee Chairman would increase to £33,000 and the fees paid to Directorswould increase to £28,000. These increases would take effect from 1 October 2016.

Expenditure by the Company on remuneration and distributions to shareholdersThe table below compares the remuneration paid to Directors to distributions made to shareholders during the yearunder review and the prior financial year. In considering these figures, shareholders should take into account theCompany’s investment objective.

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Remuneration payable to Directors1 148 166 (10.8)

Distributions paid to shareholders

– Dividends paid during the year 7,101 4,654 +52.6

– Share buybacks 3,905 – N/A

Total distributions paid to shareholders 11,006 4,654 +136.51Directors’ fees decreased during the year as the number of Directors decreased from six to five following the retirement of The Hon. Rupert Carington.

Eight year share price and Benchmark1 total returns

Source: Morningstar/Thomson Reuters. Rebased to 100 at 30 September 2008.1The Benchmark is the MSCI All Countries Asia excluding Japan Index in sterling terms. Prior to 31 January 2011, the Benchmark was the MSCI All Countries FarEast excludng Japan Index in sterling terms.

Directors’ share interestsThe Company’s Articles of Association do not require Directors to own shares in the Company. The interests ofDirectors, including those of connected persons, at the beginning and end of the financial year under review are setout below.

Ordinary shares Ordinary shares

of 10p each of 10p each

at 30 September at 1 October

2016 2015

Nicholas Smith 20,000 20,000

Keith Craig1 7,544 –

Anthony Fenn 12,000 12,000

Rosemary Morgan 7,162 7,205

James Williams 5,500 5,500

1Appointed as a Director on 19 May 2015.

The information in the above table has been audited.

Following the year end, Ms. Morgan disposed of 21 shares. There have been no other changes to the Directors’share interests as at the date of this Report.


12 December 2016

Benchmark Share price

30-Sep-08 30-Sep-1030-Sep-09 30-Sep-11 30-Sep-12 30-Sep-13 30-Sep-14 30-Sep-15 30-Sep-16100

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Report on the financial statementsOur opinionIn our opinion, Schroder AsiaPacific Fund plc’s financial statements (the “financial statements”):

• give a true and fair view of the state of the Company’s affairs as at 30 September 2016 and of its profit for the year thenended;

• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and• have been prepared in accordance with the requirements of the Companies Act 2006.

What we have auditedThe financial statements, included within the Annual Report and Accounts (the “Annual Report”), comprise:

• the Statement of Financial Position as at 30 September 2016;• the Income Statement for the year then ended;• the Statement of Changes in Equity for the year then ended; and• the notes to the financial statements, which include a summary of significant accounting policies and other explanatory

information.

Certain required disclosures have been presented elsewhere in the Annual Report, rather than in the notes to the financialstatements. These are cross-referenced from the financial statements and are identified as audited.

The financial reporting framework that has been applied in the preparation of the financial statements is United KingdomAccounting Standards, comprising FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”,and applicable law (United Kingdom Generally Accepted Accounting Practice).

Our audit approachMateriality• Overall materiality: £6.58 million which represents 1% of net assets.

Audit Scope• The Company is a standalone Investment Trust Company and engages Schroder Unit Trusts Limited (the “Manager”) to

manage its assets.• We conduct our audit of the financial statements at the offices of HSBC Securities Services (“HSS”), to whom the Manager

has, with the consent of the Directors, delegated the provision of certain administrative functions.• We tailored the scope of our audit taking into account the types of investments within the Company, the involvement of the

third parties referred to above, the accounting processes and controls, and the industry in which the Company operates.

Areas of focus• Income from investments.• Valuation and existence of investments.

The scope of our audit and our areas of focusWe conducted our audit in accordance with International Standards on Auditing (UK and Ireland) (“ISAs (UK & Ireland)”).

We designed our audit by determining materiality and assessing the risks of material misstatement in the financial statements.As in all of our audits we also addressed the risk of management override of internal controls, including evaluating whether therewas evidence of bias by the Directors that represented a risk of material misstatement due to fraud.

The risks of material misstatement that had the greatest effect on our audit, including the allocation of our resources and effort,are identified as “areas of focus” in the table below. We have also set out how we tailored our audit to address these specificareas in order to provide an opinion on the financial statements as a whole, and any comments we make on the results of ourprocedures should be read in this context. This is not a complete list of all risks identified by our audit.


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How we tailored the audit scopeWe tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financialstatements as a whole, taking into account the types of investments within the Company, the involvement of the Manager, theaccounting processes and controls, and the industry in which the Company operates.

We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) (“ISAs (UK & Ireland)”).

The Company’s accounting is delegated to HSS who maintains its own accounting records and controls and reports to theManager and the Directors.

As part of our risk assessment, we assessed the control environment in place at both the Manager and HSS to the extentrelevant to our audit. This assessment involved obtaining and reading the relevant control reports, issued by the independentauditors of the Manager and HSS in accordance with generally accepted assurance standards for such work, to gain anunderstanding of both the Manager’s and HSS’s control environment and to consider the operating and accounting structure atboth the Manager and HSS. Following this assessment, we applied professional judgement to determine the extent of testingrequired over each balance in the financial statements.

MaterialityThe scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality.These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extentof our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect ofmisstatements, both individually and on the financial statements as a whole.

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

Overall materiality £6.58 million (2015: £4.78 million).How we determined it 1% of net assets.

Area of focusIncome from investmentsRefer to pages 25 and 26 (Report of the Audit Committee), pages 38and 39 (Accounting Policies) and page 40 (notes).ISAs (UK & Ireland) presume there is a risk of fraud in incomerecognition. We considered this risk to specifically relate to the risk ofoverstating investment gains and the misclassification of dividendincome as capital rather than revenue due to the pressuremanagement may feel to achieve capital growth in line with theobjective of the Company.We focused on the valuation of investments with respect to gains oninvestments and the accuracy and completeness of dividend incomerecognition and its presentation in the Income Statement as set out inthe requirements of The Association of Investment CompaniesStatement of Recommended Practice (the “AIC SORP”).

How our audit addressed the area of focusWe assessed the accounting policy for income recognition forcompliance with accounting standards and the AIC SORP andperformed testing to check that income had been accounted for inaccordance with this stated accounting policy.We found that the accounting policies implemented were inaccordance with accounting standards and the AIC SORP, and thatincome has been accounted for in accordance with the statedaccounting policy.We understood and assessed the design and implementation of keycontrols surrounding income recognition.The gains/losses on investments held at fair value comprise realisedand unrealised gains/losses. For unrealised gains and losses, wetested the valuation of the portfolio at the year end (see below),together with testing the reconciliation of opening and closinginvestments. For realised gains/losses, we tested disposal proceedsby agreeing the proceeds to bank statements and we re-performedthe calculation of a sample of realised gains/losses. No misstatementswere identified by our testing which required reporting to thosecharged with governance.In addition, we tested dividend receipts by agreeing the dividendrates from a sample of investments to independent third partysources. No misstatements were identified by our testing whichrequired reporting to those charged with governance.To test for completeness, we tested that the appropriate dividendshad been received in the year by reference to independent data ofdividends declared for a sample of investment holdings in theportfolio. Our testing did not identify any unrecorded dividends.We tested the allocation and presentation of dividend incomebetween the revenue and capital return columns of the IncomeStatement in line with the requirements set out in the AIC SORP. Wethen tested the classification of income and capital special dividendsto independent third party sources. We did not find any specialdividends that were not treated in accordance with the AIC SORP.

Valuation and existence of investmentsRefer to pages 25 and 26 (Report of the Audit Committee), page 38(Accounting Policies) and page 43 (notes). The investment portfolioat 30 September 2016 comprised listed equity investments,preference shares and warrants of £661 million. We focused on thevaluation and existence of investments because investmentsrepresent the principal element of the net asset value as disclosedin the Statement of Financial Position in the financial statements.

We 100% tested the valuation of the listed investments by agreeingthe prices used in the valuation to independent third party sources. Nomisstatements were identified by our testing which required reportingto those charged with governance.We agreed the existence of investments to independent third partysources by agreeing the holdings of investments to an independentconfirmation from the Depositary, HSBC Bank plc. No differenceswere identified.



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Rationale for benchmark applied We have applied this benchmark, a generally accepted auditing practice for investmenttrust audits, in the absence of indicators that an alternative benchmark would beappropriate and because we believe this provides an appropriate and consistent year onyear basis for our audit.

We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £329,000(2015: £239,000) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.

Going concernUnder the Listing Rules we are required to review the Directors’ statement, set out on page 17, in relation to going concern. Wehave nothing to report having performed our review.

Under ISAs (UK & Ireland) we are required to report to you if we have anything material to add or to draw attention to in relationto the Directors’ statement about whether they considered it appropriate to adopt the going concern basis in preparing thefinancial statements. We have nothing material to add or to draw attention to.

As noted in the Directors’ statement, the Directors have concluded that it is appropriate to adopt the going concern basis inpreparing the financial statements. The going concern basis presumes that the Company has adequate resources to remain inoperation, and that the Directors intend it to do so, for at least one year from the date the financial statements were signed. Aspart of our audit we have concluded that the Directors’ use of the going concern basis is appropriate.

However, because not all future events or conditions can be predicted, these statements are not a guarantee as to theCompany’s ability to continue as a going concern.

Other required reportingConsistency of other informationCompanies Act 2006 opinionIn our opinion, the information given in the Strategic Report and the Report of the Directors for the financial year for which thefinancial statements are prepared is consistent with the financial statements.

ISAs (UK & Ireland) reportingUnder ISAs (UK & Ireland) we are required to report to you if, in our opinion:• information in the Annual Report is: We have no

− materially inconsistent with the information in the audited financial statements; or exceptions to report.− apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Company

acquired in the course of performing our audit; or− otherwise misleading.

• the statement given by the Directors on page 27, in accordance with provision C.1.1 of the UK We have no Corporate Governance Code (the “Code”), that they consider the Annual Report taken as a whole to exceptions to report.be fair, balanced and understandable and provides the information necessary for members to assess the Company’sposition and performance, business model and strategy is materially inconsistent with our knowledgeof the Company acquired in the course of performing our audit.

• the section of the Annual Report on page 25, as required by provision C.3.8 of the Code, describing the work of We have no the Audit Committee does not appropriately address matters communicated by us to the Audit Committee. exceptions to report.

The Directors’ assessment of the prospects of the Company and of the principal risks that wouldthreaten the solvency or liquidity of the CompanyUnder ISAs (UK & Ireland) we are required to report to you if we have anything material to add or to draw attention to in relation to:

• the Directors’ confirmation on pages 15 and 16 of the Annual Report, in accordance with provision C.2.1 of the Code, that they have carried out a robust assessment of the principal risks facing the Company, including thosethat would threaten its business model, future performance, solvency or liquidity.

• the disclosures in the Annual Report that describe those risks and explain how they are being managed or mitigated.

• the Directors’ explanation on page 17 of the Annual Report, in accordance with provision C.2.2 of the Code, asto how they have assessed the prospects of the Company, over what period they have done so and why theyconsider that period to be appropriate, and their statement as to whether they have a reasonable expectation thatthe Company will be able to continue in operation and meet its liabilities as they fall due over the period of theirassessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.

Under the Listing Rules we are required to review the Directors’ statement that they have carried out a robust assessment of the principal risksfacing the Company and the Directors’ statement in relation to the longer-term viability of the Company. Our review was substantially less inscope than an audit and only consisted of making inquiries and considering the Directors’ process supporting their statements; checking thatthe statements are in alignment with the relevant provisions of the Code; and considering whether the statements are consistent with theknowledge acquired by us in the course of performing our audit. We have nothing to report having performed our review.

Adequacy of accounting records and information and explanations receivedUnder the Companies Act 2006 we are required to report to you if, in our opinion:

• we have not received all the information and explanations we require for our audit; or

We have nothingmaterial to add or todraw attention to.




• adequate accounting records have not been kept, or returns adequate for our audit have not been received from branchesnot visited by us; or

• the financial statements and the part of the Remuneration Report to be audited are not in agreement with the accountingrecords and returns.

We have no exceptions to report arising from this responsibility.

Directors’ remunerationDirectors’ remuneration report – Companies Act 2006 opinionIn our opinion, the part of the Remuneration Report to be audited has been properly prepared in accordance with theCompanies Act 2006.

Other Companies Act 2006 reportingUnder the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of Directors’ remunerationspecified by law are not made. We have no exceptions to report arising from this responsibility.

Corporate governance statementUnder the Listing Rules we are required to review the part of the Corporate Governance Statement relating to ten furtherprovisions of the Code. We have nothing to report having performed our review.

Responsibilities for the financial statements and the auditOur responsibilities and those of the DirectorsAs explained more fully in the Statement of Directors’ Responsibilities set out on page 27, the Directors are responsible for thepreparation of the financial statements and for being satisfied that they give a true and fair view.

Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and ISAs (UK& Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance withChapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept orassume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it maycome save where expressly agreed by our prior consent in writing.

What an audit of financial statements involvesAn audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonableassurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes anassessment of:

• whether the accounting policies are appropriate to the Company’s circumstances and have been consistently applied andadequately disclosed;

• the reasonableness of significant accounting estimates made by the Directors; and• the overall presentation of the financial statements.

We primarily focus our work in these areas by assessing the Directors’ judgements against available evidence, forming our ownjudgements, and evaluating the disclosures in the financial statements.

We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to providea reasonable basis for us to draw conclusions. We obtain audit evidence through substantive procedures.

In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies withthe audited financial statements and to identify any information that is apparently materially incorrect based on, or materiallyinconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparentmaterial misstatements or inconsistencies we consider the implications for our report.

Richard McGuire (Senior Statutory Auditor)for and on behalf of PricewaterhouseCoopers LLPChartered Accountants and Statutory AuditorsLondon

12 December 2016

• The maintenance and integrity of the webpage dedicated to the Company is the responsibility of the Manager; the work carried out by theauditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that mayhave occurred to the financial statements since they were initially presented on the website.

• Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in otherjurisdictions.



2016 2015Revenue Capital Total Revenue Capital Total

Note £’000 £’000 £’000 £’000 £’000 £’000

Gains/(losses) on investments held at fair value through profit or loss 2 – 186,860 186,860 – (17,571) (17,571)

Gains/(losses) on derivative contracts – 163 163 – (55) (55)

Net foreign currency losses – (3,664) (3,664) – (1,032) (1,032)

Income from investments 3 15,232 220 15,452 13,597 – 13,597

Other interest receivable and similar income 3 1 – 1 2 – 2

Gross return/(loss) 15,233 183,579 198,812 13,599 (18,658) (5,059)

Investment management fee 4 (5,006) – (5,006) (4,571) – (4,571)

Administrative expenses 5 (855) – (855) (939) – (939)

Net return/(loss) before finance costs and taxation 9,372 183,579 192,951 8,089 (18,658) (10,569)

Finance costs 6 (304) – (304) (116) – (116)

Net return/(loss) on ordinary activities before taxation 9,068 183,579 192,647 7,973 (18,658) (10,685)

Taxation on ordinary activities 7 (1,028) (162) (1,190) (822) (1,496) (2,318)

Net return/(loss) on ordinary activities after taxation 8,040 183,417 191,457 7,151 (20,154) (13,003)

Return/(loss) per Ordinary share 9 4.77p 108.78p 113.55p 4.23p (11.91)p (7.68)p

The “Total” column of this statement is the profit and loss account of the Company. The “Revenue” and “Capital” columnsrepresent supplementary information prepared under guidance issued by The Association of Investment Companies. TheCompany has no recognised gains and losses other than those included in the Income Statement and Statement of Changes inEquity.

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired ordiscontinued in the year.

The notes on pages 38 to 51 form an integral part of these accounts.


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Income Statementfor the year ended 30 September 2016

Called-up Capital Warrant Shareshare Share redemption exercise purchase Capital Revenue

capital premium reserve reserve reserve reserves reserve Total£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

At 30 September 2014 16,923 100,956 3,221 8,704 36,301 324,694 4,728 495,527

Net (loss)/return on ordinary activities – – – – – (20,154) 7,151 (13,003)

Ordinary dividend paid in the year – – – – – – (4,654) (4,654)

At 30 September 2015 16,923 100,956 3,221 8,704 36,301 304,540 7,225 477,870

Repurchase and cancellation of the Company’s own Ordinary shares (143) – 143 – (3,905) – – (3,905)

Net return on ordinary activities – – – – – 183,417 8,040 191,457

Ordinary dividend paid in the year – – – – – – (7,101) (7,101)

At 30 September 2016 16,780 100,956 3,364 8,704 32,396 487,957 8,164 658,321



Statement of Changes in Equityfor the year ended 30 September 2016


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2016 2015Note £’000 £’000

Fixed assets

Investments held at fair value through profit or loss 10 661,405 487,181

Current assets 11

Debtors 1,654 5,128

Cash at bank and in hand 18,196 18,763

19,850 23,891

Current liabilities 12

Creditors: amounts falling due within one year (22,934) (33,147)

Derivative financial instrument held at fair value through profit or loss – (55)

Net current liabilities (3,084) (9,311)

Total assets less current liabilities 658,321 477,870

Net assets 658,321 477,870

Capital and reserves

Called-up share capital 13 16,780 16,923

Share premium 14 100,956 100,956

Capital redemption reserve 14 3,364 3,221

Warrant exercise reserve 14 8,704 8,704

Share purchase reserve 14 32,396 36,301

Capital reserves 14 487,957 304,540

Revenue reserve 14 8,164 7,225

Total equity shareholders’ funds 658,321 477,870

Net asset value per Ordinary share 15 392.33p 282.39p

These accounts were approved and authorised for issue by the Board of Directors on 12 December 2016 and signed on itsbehalf by:



Company registration number: 3104981

Statement of Financial Positionat 30 September 2016

1. Accounting Policies(a) Basis of accounting

The accounts are prepared in accordance with the Companies Act 2006, United Kingdom Generally Accepted AccountingPractice (“UK GAAP”) and with the Statement of Recommended Practice “Financial Statements of Investment TrustCompanies and Venture Capital Trusts” (the “SORP”) issued by the Association of Investment Companies in November2014 and which superseded the SORP issued in January 2009. All of the Company’s operations are of a continuingnature.

The accounts have been prepared on a going concern basis under the historical cost convention, as modified by therevaluation of investments at fair value through profit or loss.

The accounts are presented in sterling and amounts have been rounded to the nearest thousand.

With effect from 1 October 2015, the Company has adopted Financial Reporting Standard (FRS) 102 “The FinancialReporting Standard applicable in the UK and Republic of Ireland” and the amended SORP, both of which becameeffective for periods beginning on or after 1 January 2015. FRS 102 replaces all extant standards applicable to theCompany’s accounts. As a result there are some presentational changes to the accounts but no change in the waynumbers are measured. The adoption of FRS 102 has not affected the reported financial position or financialperformance of the Company.

The changes to these accounts arising from FRS 102 and the amended SORP may be summarised briefly as follows:

• the reconciliation of movements in shareholders’ funds has been renamed “Statement of changes in equity”;

• the balance sheet has been renamed “Statement of financial position”;

• the Company no longer presents a statement of cash flows or the two related notes, as it is no longer required foran investment company which meets certain specified conditions; and

• footnotes have been added to note 14, indicating which of the Company’s reserves are regarded as distributable.

Other than these changes, the accounting policies applied to these accounts are consistent with those applied in theaccounts for the year ended 30 September 2015.

The Company has early adopted an amendment to paragraph 34.22 of FRS 102, issued by the Financial ReportingCouncil in March 2016 regarding the categorisation of financial instruments into the fair value hierarchy in note 18. Asa result of this amendment, the criteria used to allocate financial instruments into the three levels remain unchangedfrom prior years.

(b) Valuation of investmentsThe Company’s business is investing in financial assets with a view to profiting from their total return in the form ofincome and capital growth. This portfolio of financial assets is managed and its performance evaluated on a fair valuebasis, in accordance with a documented investment objective and information is provided internally on that basis tothe Company’s Board of Directors. Accordingly, upon initial recognition the investments are designated by theCompany as “held at fair value through profit or loss”. Investments are included initially at fair value which is taken tobe their cost, excluding expenses incidental to purchase which are written off to capital at the time of acquisition.Subsequently the investments are valued at fair value, which are quoted bid prices at 24:00 hours on the accountingdate, for investments traded in active markets.

All purchases and sales are accounted for on a trade date basis.

(c) Accounting for reservesGains and losses on sales of investments are included in the Income Statement and in capital reserves within “Gainsand losses on sales of investments”. Increases and decreases in the valuation of investments held at the year end areincluded in the Income Statement and in capital reserves within “Holding gains and losses on investments”.

Foreign exchange gains and losses on cash and deposit balances and unrealised exchange gains and losses onforeign currency loans are included in the Income Statement and in capital reserves.

The cost of repurchasing Ordinary shares including the related stamp duty and transactions costs is charged to“Share repurchase reserve”.

(d) IncomeDividends receivable are included in revenue on an ex-dividend basis except where, in the opinion of the Board, thedividend is capital in nature, in which case it is included in capital.

UK dividends are included net of tax credits. Overseas dividends are included gross of any withholding tax.


Notes to the Accounts

Where the Company has elected to receive scrip dividends in the form of additional shares rather than in cash, theamount of the cash dividend foregone is recognised in revenue. Any excess in the value of the shares received overthe amount of the cash dividend is recognised in capital.

Deposit interest outstanding at the year end is calculated and accrued on a time apportionment basis using marketrates of interest.

(e) Expenses

All expenses are accounted for on an accruals basis. Expenses are allocated wholly to the revenue column of theIncome Statement except that expenses incidental to the purchase or sale of an investment are charged to capital.

These expenses are commonly referred to as transaction costs and mainly comprise brokerage commission. Detailsof transactions costs are given in note 10 on page 43.

(f) Finance costs

Finance costs, including any premiums payable on settlement or redemption and direct issue costs, are accountedfor on an accruals basis using the effective interest method and in accordance with the provisions of FRS 102.

Finance costs are allocated wholly to the revenue column of the Income Statement.

(g) Financial instruments

Cash at bank and in hand may comprise cash and demand deposits which are readily convertible to a knownamount of cash and are subject to insignificant risk of changes in value.

Other debtors and creditors do not carry any interest, are short-term in nature and are accordingly stated at nominalvalue, with debtors reduced by appropriate allowances for estimated irrecoverable amounts.

Bank loans and overdrafts are classified as loans and receivables and are initially measured at fair value andsubsequently at amortised cost. They are recorded at the proceeds received net of direct issue costs.

Gains or losses on derivative financial instruments are treated as capital or revenue depending on the motive andcircumstances of the transaction. Where positions are undertaken to protect or enhance capital, the returns arecapital and where they are generating or protecting revenue, the returns are revenue. Where positions generate totalreturns, the returns are apportioned between capital and revenue to reflect the nature of the transaction.

Any derivative positions open at the year end are included in current assets or current liabilities in the Statement ofFinancial Position at fair value, using market prices.

(h) Taxation

Current tax is provided at the amounts expected to be received or paid.

Deferred tax is accounted for in accordance with FRS 102.

Deferred tax is provided on all timing differences that have originated but not reversed by the balance sheet date.

Deferred tax liabilities are recognised for all taxable timing differences but deferred tax assets are only recognised tothe extent that it is probable that taxable profits will be available against which those timing differences can beutilised.

Deferred tax is measured at the tax rate which is expected to apply in the periods in which the timing differences areexpected to reverse, based on tax rates that have been enacted or substantively enacted at the balance sheet dateand is measured on an undiscounted basis.

(i) Value added tax (“VAT”)

Expenses are disclosed inclusive of any related irrecoverable VAT.

(j) Foreign currency

In accordance with FRS 102, the Company is required to nominate a functional currency, being the currency in whichthe Company predominantly operates. The Board, having regard to the currency of the Company’s share capital andthe predominant currency in which its shareholders operate, has determined that sterling is the functional currencyand the currency in which the accounts are presented.

Transactions denominated in foreign currencies are converted at actual exchange rates as at the date of thetransaction. Monetary assets, liabilities and equity investments held at fair value, denominated in foreign currencies atthe year end are translated at the rates of exchange prevailing at 16:00 hours on the accounting date.


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(k) Dividends payable

In accordance with FRS 102, the final dividend is included in the accounts in the year in which it is paid.

(l) Repurchases of Ordinary shares for cancellation

The cost of repurchasing Ordinary shares including the related stamp duty and transactions costs is charged to“Share purchase reserve” and dealt with in the Statement of Changes in Equity. Share repurchase transactions areaccounted for on a trade date basis. The nominal value of Ordinary share capital repurchased and cancelled istransferred out of “Called-up share capital” and into “Capital redemption reserve”.

2. Gains/(losses) on investments held at fair value through profit or loss2016 2015

£’000 £’000

Gains on sales of investments based on historic cost 24,511 23,719Amounts recognised in investment holding gains and losses in the previous year in respect of investments sold in the year (5,137) (10,387)

Gains on sales of investments based on the carrying value at the previous balance sheet date 19,374 13,332Net movement in investment holding gains and losses 167,486 (30,903)

Gains/(losses) on investments held at fair value through profit or loss 186,860 (17,571)

3. Income2016 2015

£’000 £’000

Income from investments:Overseas dividends 14,938 13,164UK dividends 157 384Scrip dividends 137 49

15,232 13,597

Other interest receivable and similar income:Deposit interest 1 2

15,233 13,599

Capital:Special dividend allocated to capital 220 –

4. Investment management fee2016 2015

£’000 £’000

Management fee 5,006 4,571

The basis for calculating the investment management fee is set out in the Report of the Directors on page 21.



5. Administrative expenses2016 2015

£’000 £’000

Administration expenses 589 667Directors’ fees1 147 155Secretarial fee 97 96Auditors’ remuneration for audit services 20 19Auditors’ remuneration for taxation compliance services 2 2

855 939

1Full details are given in the remuneration report on pages 28 to 30.

6. Finance costs2016 2015

£’000 £’000

Interest on bank loans and overdrafts 304 116

7. Taxation2016 2015

Revenue Capital Total Revenue Capital Total£’000 £’000 £’000 £’000 £’000 £’000

(a) Analysis of tax charge for the year:

Irrecoverable overseas withholding tax 1,028 – 1,028 822 – 822Overseas capital gains tax – 162 162 – 1,496 1,496

Tax charge for the year 1,028 162 1,190 822 1,496 2,318

The Company has no corporation tax liability for the year ended 30 September 2016 (2015: nil).

(b) Factors affecting tax charge for the year

The tax assessed for the year is lower (2015: higher) than the Company’s applicable rate of corporation tax for theyear of 20.0% (2015: 20.5%).

The factors affecting the tax charge for the year are as follows:

2016 2015Revenue Capital Total Revenue Capital Total

£’000 £’000 £’000 £’000 £’000 £’000

Net return/(loss) on ordinary activities before taxation 9,068 183,579 192,647 7,973 (18,658) (10,685)

Net return/(loss) on ordinary activities before taxation multiplied by the Company’s applicable rate of corporation tax for the year of 20.0% (2015: 20.5%) 1,814 36,716 38,530 1,634 (3,824) (2,190)Effects of:Capital returns on investments – (36,672) (36,672) – 3,824 3,824Income not chargeable to corporation tax (2,741) (44) (2,785) (2,493) – (2,493)Overseas withholding tax 1,028 – 1,028 822 – 822Overseas capital gains tax – 162 162 – 1,496 1,496Unrelieved expenses 927 – 927 859 – 859

Tax charge for the year 1,028 162 1,190 822 1,496 2,318


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(c) Deferred taxation

The Company has an unrecognised deferred tax asset of £4,923,000 (2015: £4,543,000) based on a prospectivecorporation tax rate of 18% (2015: 20%). The reduction in the standard rate of corporation tax was substantivelyenacted in October 2015 and is effective from 1 April 2020.

The deferred tax asset has arisen due to the cumulative excess of deductible expenses over taxable income. Giventhe composition of the Company’s portfolio, it is not likely that this asset will be utilised in the foreseeable future andtherefore no asset has been recognised in the accounts.

Given the Company’s intention to meet the conditions required to retain its status as an Investment Trust Company,no provision has been made for deferred tax on any capital gains or losses arising on the revaluation or disposal ofinvestments.

8. DividendsDividends paid and proposed

2016 2015£’000 £’000

2015 final dividend of 4.20p (2014: 2.75p) paid out of revenue profits 7,101 4,654

2016 2015£’000 £’000

2016 final dividend proposed of 4.75p (2015: 4.20p) to be paid out of revenue profits 7,970 7,107

The proposed final dividend amounting to £7,970,000 (2015: £7,107,000) is the amount used for the basis ofdetermining whether the Company has satisfied the distribution requirements of Section 1158 of the Corporation Tax Act2010. The revenue available for distribution for the year is £8,040,000 (2015: £7,151,000).

The final dividend declared in respect of the year ended 30 September 2015 differs from the amount actually paid due toshares repurchased and cancelled after the accounting date but prior to the share register record date.

9. Return/(loss) per Ordinary share2016 2015

Revenue return (£’000) 8,040 7,151Capital return/(loss) (£’000) 183,417 (20,154)

Total return/(loss) (£’000) 191,457 (13,003)

Weighted average number of Ordinary shares in issue during the year 168,605,440 169,225,716Revenue return per share 4.77p 4.23pCapital return/(loss) per share 108.78p (11.91)p

Total return/(loss) per share 113.55p (7.68)p



10. Investments held at fair value through profit or loss2016 2015

£’000 £’000

Opening book cost 441,413 403,516Opening investment holding gains 45,768 87,058

Opening valuation 487,181 490,574Purchases at cost 223,653 195,946Sales proceeds (236,289) (181,768)Gains on sales of investments based on the carrying valueat the previous balance sheet date 19,374 13,332Net movement in investment holding gains and losses 167,486 (30,903)

Closing valuation 661,405 487,181

Closing book cost 453,288 441,413Closing investment holding gains 208,117 45,768

Total investments held at fair value through profit or loss 661,405 487,181

The following transaction costs, comprising stamp duty and brokerage commission, were incurred in the year:

2016 2015£’000 £’000

On acquisitions 338 382On disposals 531 390

869 772

11. Current assetsDebtors 2016 2015

£’000 £’000

Securities sold awaiting settlement – 4,180Dividends and interest receivable 1,353 870Taxation recoverable 272 57Other debtors 29 21

1,654 5,128

The Directors consider that the carrying amount of debtors approximates to their fair value.

Cash at bank and in handCash at bank and in hand comprises bank balances and cash held by the Company, including short-term deposits. Thecarrying amount of these represents their fair value. Cash balances in excess of a predetermined amount are placed onshort-term deposit at market rates of interest.


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12. Current liabilitiesCreditors: amounts falling due within one year

2016 2015£’000 £’000

Bank loan 21,023 29,708Securities purchased awaiting settlement 259 2,160Other creditors and accruals 1,652 1,279

22,934 33,147

The loan comprises US$27.3 million (£21.0 million) drawn down on the Company’s £50 million, 364 day, multi-currencycredit facility with Scotiabank.

The Facility is unsecured but is subject to covenants and restrictions which are customary for a facility of this nature, all ofwhich have been complied with during the year. The loan at the prior year end comprised US$45.0 million (£29.7 million)drawn down on the Facility. Further details of the Facility are given in note 19 on pages 48 and 49.

The Directors consider that the carrying amount of creditors falling due within one year approximates to their fair value.

Derivative financial instrument held at fair value through profit or loss

2016 2015£’000 £’000

Forward foreign currency contract – 55

At 30 September 2015, the Company held a single contract to purchase US$153.9 million for HK$1,193.7 million, forsettlement on 3 March 2016.

Details of the Company’s strategy for managing currency risk are given in note 19(a) (i) on pages 47 and 48.

13. Called-up share capital2016 2015

£’000 £’000

Ordinary shares of 10p each allotted, called up and fully paid:Opening balance of 169,225,716 (2015: 169,225,716) Ordinary shares 16,923 16,923Repurchase and cancellation of 1,430,000 (2015: nil) Ordinary shares (143) –

Closing balance of 167,795,716 (2015: 169,225,716) Ordinary shares 16,780 16,923

During the year, the Company made market purchases of 1,430,000 of its own Ordinary shares, nominal value £143,000,for cancellation, representing 0.84% of the Ordinary shares outstanding at the beginning of the year. The totalconsideration paid for these shares amounted to £3,905,000. The reason for these purchases was to seek to managethe volatility of the share price discount to NAV per share.



14. ReservesCapital reserves

Gains and InvestmentCapital Warrant Share losses on holding

Share redemption exercise purchase sales of gains and Revenuepremium1 reserve2 reserve3 reserve4 investments5 losses6 reserve7

£’000 £’000 £’000 £’000 £’000 £’000 £’000

Opening balance 100,956 3,221 8,704 36,301 260,149 44,391 7,225Gains on sales of investmentsbased on the carrying value at the previous balance sheet date – – – – 19,374 – –Net movement in investmentholding gains and losses – – – – – 167,486 –Transfer on disposalof investments – – – – 5,137 (5,137) –Realised gain on derivativecontract – – – – 163 – –Realised exchange gains oncash and short-term deposits – – – – 995 – –Exchange losses on the creditfacility – – – – (3,889) (770) –Capital gains tax – – – – (162) – –Special dividend allocatedto capital – – – – 220 – –Repurchase and cancellation ofthe Company’s own Ordinaryshares – 143 – (3,905) – – –Dividend paid – – – – – – (7,101)Retained revenue for the year – – – – – – 8,040

Closing balance 100,956 3,364 8,704 32,396 281,987 205,970 8,1641The share premium is a non distributable reserve and represents the amount by which the fair value of the consideration received from shares issuedexceeds the nominal value of shares issued.2The capital redemption reserve represents the accumulated nominal value of Ordinary shares repurchased for cancellation. This reserve is not distributable.3The warrant exercise reserve is a non distributable reserve and arose via an apportionment of the premium on the issue of Ordinary shares with warrants attached.4The share purchase reserve arose following the cancellation of the balance of share premium in 1998 and was created for the purpose of financing sharebuybacks. This is a realised (distributable) capital reserve which may be used to repurchase the Company’s own shares or distributed as dividends.5This is a realised (distributable) capital reserve which may be used to repurchase the Company’s own shares or distributed as dividends.6This reserve comprises holding gains on liquid investments (which may be deemed to be realised) and other amounts which are unrealised. An analysishas not been made between those amounts that are realised (and may be distributed as dividends or used to repurchase the Company’s own shares) and those that are unrealised.7The revenue reserve may be distributed as dividends or used to repurchase the Company’s own shares.

15. Net asset value per Ordinary share2016 2015

Net assets attributable to the Ordinary shareholders (£’000) 658,321 477,870Ordinary shares in issue at the year end 167,795,716 169,225,716

Net asset value per Ordinary share 392.33p 282.39p

16. Transactions with the ManagerUnder the terms of the AlFM Agreement, the Manager is entitled to receive a management fee and a company secretarialfee. Details of the basis of the management fee calculation are given in the Report of the Directors on page 21. Anyinvestments in funds managed or advised by the Manager or any of its associated companies, are excluded from theassets used for the purpose of the calculation and therefore incur no fee.

The management fee payable in respect of the year ended 30 September 2016 amounted to £5,006,000 (2015:£4,571,000), of which £1,414,000 (2015: £1,069,000) was outstanding at the year end. The company secretarial fee


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payable in respect of the year ended 30 September 2016 amounted to £97,000 (2015: £96,000), of which £24,000(2015: £25,000) was outstanding at the year end.

No Director of the Company served as a director of any member of the Schroder Group, at any time during the year.

17. Related party transactionsDetails of the remuneration payable to Directors are given in the Remuneration Report on page 29 and details ofDirectors’ shareholdings are given in the Remuneration Report on page 30. There have been no other transactions withrelated parties during the year (2015: nil).

18. Disclosures regarding financial instruments measured at fair valueThe Company’s financial instruments within the scope of FRS 102 that are held at fair value comprise its investmentportfolio. The Company has held derivative financial instruments during the year, but none were held at the year end.

These are categorised into a hierarchy consisting of the following three levels:

Level 1 – valued using quoted prices in active markets.

Level 2 – valued by reference to valuation techniques using observable inputs other than quoted market prices includedwithin Level 1.

Level 3 – valued by reference to valuation techniques using inputs that are not based on observable market data.Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fairvalue measurement of the relevant asset.

Details of the valuation techniques used by the Company are given in note 1(b) on page 38.

At 30 September 2016, the Company’s investments were all categorised in Level 1 (2015: investments and derivativefinancial instruments all Level 1).

There have been no transfers between Levels 1, 2 or 3 during the year (2015: nil).

19. Financial instruments’ exposure to risk and risk managementpoliciesThe investment objective is set out on the inside front cover of this Report. In pursuing this objective, the Company isexposed to a variety of financial risks that could result in a reduction in the Company’s net assets or a reduction in theprofits available for dividends. These financial risks include market risk (comprising currency risk, interest rate risk andmarket price risk), liquidity risk and credit risk. The Directors’ policy for managing these risks is set out below. The Boardcoordinates the Company’s risk management policy.

The objectives, policies and processes for managing the risks and the methods used to measure the risks that are setout below, have not changed from those applying in the comparative year.

The Company’s classes of financial instruments may comprise the following:

– investments in shares, warrants and depositary receipts which are held in accordance with the Company’s investmentobjective;

– short-term debtors, creditors and cash arising directly from its operations;

– a multi-currency overdraft facility with HSBC, the purpose of which is to assist in financing the Company’s operations;

– a multi-currency revolving credit facility with Scotiabank, the purpose of which is to assist in financing the Company’soperations; and

– forward foreign currency contracts, the purpose of which is to manage the currency risk arising from the Company’sinvestment activities.

(a) Market risk

The fair value or future cash flows of a financial instrument held by the Company may fluctuate because of changes inmarket prices. This market risk comprises three elements: currency risk, interest rate risk and market price risk.Information to enable an evaluation of the nature and extent of these three elements of market risk is given in parts (i)to (iii) of this note, together with sensitivity analyses where appropriate. The Board reviews and agrees policies formanaging these risks and these policies have remained unchanged from those applying in the comparative year. The


Manager assesses the exposure to market risk when making each investment decision and monitors the overall levelof market risk on the whole of the investment portfolio on an ongoing basis.

(i) Currency risk

Certain of the Company’s assets, liabilities and income are denominated in currencies other than sterling, which is theCompany’s functional currency and the presentational currency of the accounts. As a result, movements in exchangerates will affect the sterling value of those items.

Management of currency riskThe Manager monitors the Company’s exposure to foreign currencies on a daily basis and reports to the Board,which meets on at least four occasions each year. The Manager measures the risk to the Company of the foreigncurrency exposure by considering the effect on the Company’s net asset value and income of a movement in therates of exchange to which the Company’s assets, liabilities, income and expenses are exposed. The Company mayuse foreign currency borrowings or forward foreign currency contracts to limit the exposure to anticipated changes inexchange rates which might otherwise adversely affect the value of the portfolio of investments. Income denominatedin foreign currencies is converted into sterling on receipt.

Foreign currency exposureThe fair value of the Company’s monetary items that have foreign currency exposure at 30 September are shownbelow. The Company’s investments (which are not monetary items) have been included separately in the analysis soas to show the overall level of exposure.

2016Hong SouthKong US Korean Taiwan Singapore Thai Indian

Dollars Dollars Won Dollars Dollars Baht Rupees Other Total£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Current assets 9,173 3,765 10 982 486 – 2,732 88 17,236Current liabilitiesCreditors: amounts falling due withinone year – (21,023) – (307) – – – – (21,330)

Foreign currencyexposure on netmonetary items 9,173 (17,258) 10 675 486 – 2,732 88 (4,094)Investments held atfair value throughprofit or loss 198,433 119,268 83,646 96,635 9,600 23,020 76,190 36,139 642,931

Total net foreigncurrency exposure 207,606 102,010 83,656 97,310 10,086 23,020 78,922 36,227 638,837

2015Hong SouthKong US Korean Taiwan Singapore Thai Indian

Dollars Dollars Won Dollars Dollars Baht Rupees Other Total£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Current assets 1,392 11,775 2,036 381 1 – 143 8 15,736Current liabilitiesCreditors: amounts falling due withinone year (1,355) (29,722) – (26) – – (123) – (31,226)Derivative financialinstrument held atfair value throughprofit or loss (101,725) 101,670 – – – – – – (55)

Foreign currencyexposure on netmonetary items (101,688) 83,723 2,036 355 1 – 20 8 (15,545)Investments held at fair value throughprofit or loss 177,696 62,356 40,397 59,998 8,843 28,114 80,003 25,086 482,493

Total net foreigncurrency exposure 76,008 146,079 42,433 60,353 8,844 28,114 80,023 25,094 466,948


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The above year end amounts are broadly representative of the exposure to foreign currency risk during the currentand comparative year.

Foreign currency sensitivityThe following tables illustrate the sensitivity of net profit for the year and net assets with regard to the Company’smonetary financial assets and financial liabilities and exchange rates. The sensitivity analysis is based on theCompany’s monetary currency financial instruments held at each balance sheet date and assumes a 10% (2015:10%) appreciation or depreciation in sterling against all the currencies to which the Company is exposed, which isconsidered to be a reasonable illustration based on the volatility of exchange rates during the year.

If sterling had weakened by 10% this would have had the following effect:

2016 2015£’000 £’000

Income Statement – return after taxationRevenue return 1,361 1,223Capital return (409) (1,555)

Total return after taxation 952 (332)

Net assets 952 (332)

Conversely if sterling had strengthened by 10% this would have had the following effect:

2016 2015£’000 £’000

Income Statement – return after taxationRevenue return (1,361) (1,223)Capital return 409 1,555

Total return after taxation (952) 332

Net assets (952) 332

In the opinion of the Directors, the above sensitivity analysis with respect to monetary financial assets and liabilities isbroadly representative of the whole of the current and comparative year. The sensitivity with regard to the Company’sinvestments and foreign currency is subsumed into market price risk sensitivity on page 50.

(ii) Interest rate riskInterest rate movements may affect the level of income receivable on cash deposits and the interest payable onvariable rate borrowings when interest rates are re-set.

Management of interest rate riskLiquidity and borrowings are managed with the aim of increasing returns to shareholders. The Board would notexpect gearing to exceed 20% where gearing is defined as borrowings used for investment purposes, less cash,expressed as a percentage of net assets.

The possible effects on cash flows that could arise as a result of changes in interest rates are taken into accountwhen the Company draws on the credit facility. However, amounts drawn on this facility are for short-term periodsand therefore exposure to interest rate risk is not significant.

Interest rate exposureThe exposure of financial assets and financial liabilities to floating interest rates, giving cash flow interest rate riskwhen rates are re-set, is shown below:

2016 2015£’000 £’000

Exposure to floating interest rates:Cash at bank and in hand 18,196 18,763Creditors: amounts falling due within one year – borrowings onthe credit facility (21,023) (29,708)

Net exposure (2,827) (10,945)

Interest receivable on cash balances is at a margin below LIBOR (2015: same).

During the year, the Company extended its £50 million (2015: £30 million), 364 day, multi-currency credit facility withScotiabank to 30 April 2017. Amounts are normally drawn down on the facility for one month periods. Interest ispayable at a rate of LIBOR as quoted in the market for the relevant currency and period, plus a margin, plusMandatory Costs, which are the lender’s costs of complying with certain regulatory requirements of the Bank ofEngland. At 30 September 2016, the Company had drawn down US$27.3 million (£21.0 million) at an interest rate of



0.76% per annum. At the prior year end, the Company had drawn down US$45.0 million (£29.7 million) at an interestrate of 0.85% per annum.

The Company also has a £30 million overdraft facility with HSBC, secured by a floating charge, but which was notutilised during the current or comparative year.

The above year end amounts are not representative of the exposure to interest rates during the year as the level ofcash balances and drawings on the credit facility have fluctuated. The maximum and minimum net cash/(debt)balances during the year are as follows:

2016 2015£’000 £’000

Maximum debit interest rate exposure during the year – net debt (27,630) (11,232)

Minimum debit/maximum credit interest rate exposure during theyear – net (debt)/cash (2,477) 7,598

Interest rate sensitivityThe following table illustrates the sensitivity of the return after taxation for the year and net assets to a 0.5% (2015:0.5%) increase or decrease in interest rates in regards to the Company’s monetary financial assets and financialliabilities. This level of change is considered to be a reasonable illustration based on observation of current marketconditions. The sensitivity analysis is based on the Company’s monetary financial instruments held at the balancesheet date with all other variables held constant.

2016 20150.5% increase 0.5% decrease 0.5% increase 0.5% decrease

in rate in rate in rate in rate£’000 £’000 £’000 £’000

Income statement – return aftertaxationRevenue return (14) 14 (55) 55Capital return – – – –

Total return after taxation (14) 14 (55) 55

Net assets (14) 14 (55) 55

In the opinion of the Directors, this sensitivity analysis may not be representative of the Company’s future exposure tointerest rate changes due to fluctuations in the level of cash balances and drawings on the credit facility.

(iii) Market price riskMarket price risk includes changes in market prices, other than those arising from interest rate risk, which may affectthe value of investments.

Management of market price riskThe Board meets on at least four occasions each year to consider the asset allocation of the portfolio and the riskassociated with particular countries and industry sectors. The investment management team has responsibility formonitoring the portfolio, which is selected in accordance with the Company’s investment objective and seeks toensure that individual stocks meet an acceptable risk/reward profile. The Board may authorise the Manager to enterderivative transactions for the purpose of protecting the portfolio against falls in market prices.

Market price risk exposureThe Company’s total exposure to changes in market prices at 30 September comprises the following:

2016 2015£’000 £’000

Investments held at fair value through profit or loss 661,405 487,181

The above data is broadly representative of the exposure to market price risk during the year.

Concentration of exposure to market price riskAn analysis of the Company’s investments is given on pages 10 and 11. This shows that the portfolio comprisesinvestments trading in Asian countries. Accordingly there is a concentration of exposure to that region.


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Market price risk sensitivityThe following table illustrates the sensitivity of the return after taxation for the year and net assets to an increase ordecrease of 20% (2015: 20%) in the fair values of the Company’s investments. This level of change is considered tobe a reasonable illustration based on observation of current market conditions. The sensitivity analysis is based onthe Company’s investments and adjusting for the change in the management fee, but with all other variables heldconstant.

2016 201520% increase 20% decrease 20% increase 20% decrease

in fair value in fair value in fair value in fair value£’000 £’000 £’000 £’000

Income statement – returnafter taxationRevenue return (1,058) 1,058 (779) 779Capital return 132,281 (132,281) 97,436 (97,436)

Total return after taxationand net assets 131,223 (131,223) 96,657 (96,657)

Percentage change in netasset value 19.9% (19.9%) 20.2% (20.2%)

(b) Liquidity risk

This is the risk that the Company will encounter difficulty in meeting its obligations associated with financial liabilitiesthat are settled by delivering cash or another financial asset.

Management of the riskLiquidity risk is not significant as the Company’s assets comprise mainly readily realisable securities, which can besold to meet to meet funding requirements if necessary. Short-term flexibility is achieved through the use of a creditfacility and an overdraft facility. The Board’s policy is for the Company to remain fully invested in normal marketconditions and that borrowings be used to manage working capital requirements and to gear the Company asappropriate.

Liquidity risk exposureContractual maturities of financial liabilities, based on the earliest date on which payment can be required are asfollows:

Three months Three monthsor less or less

2016 2015£’000 £’000

Creditors: amounts falling due within one yearBank loan – including interest 21,023 29,722Securities purchased awaiting settlement 259 2,160Other creditors and accruals 1,652 1,265

22,934 33,147

(c) Credit risk

Credit risk is the risk that the failure of the counterparty to a transaction to discharge its obligations under thattransaction could result in loss to the Company.

Management of credit riskThis risk is not significant and is managed as follows:

Portfolio dealingThe Company invests in markets that operate a “Delivery Versus Payment” settlement process which mitigates therisk of losing the principal of a trade during settlement. The Manager continuously monitors dealing activity to ensurebest execution, which involves measuring various indicators including the quality of trade settlement and incidence offailed trades. Counterparties must be pre-approved by the Manager’s credit committee.

CashCounterparties are subject to daily credit analysis by the Manager. Cash balances will only be deposited withreputable banks with high quality credit ratings.

Exposure to the CustodianThe Custodian of the Company’s assets is HSBC Bank plc which has Long Term Credit Ratings of AA- with Fitch andAa2 with Moody’s. The Company’s investments are held in accounts which are segregated from the Custodian’s own



trading assets. If the Custodian were to become insolvent, the Company’s right of ownership of its investments isclear and they are therefore protected. However the Company’s cash balances are all deposited with the Custodianas banker and held on the Custodian’s balance sheet. Accordingly, in accordance with usual banking practice, theCompany will rank as a general creditor to the Custodian in respect of cash balances.

Credit risk exposureThe amounts shown in the balance sheet under debtors and cash at bank and in hand represent the maximumexposure to credit risk at the current and comparative year ends. No debtors are past their due date and none havebeen provided for. There has been no stock lending during the year.

(d) Fair values of financial assets and financial liabilities

All financial assets and liabilities are either carried in the balance sheet at fair value or the balance sheet amount is areasonable approximation of fair value.

20. Capital management policies and proceduresThe Company’s objectives, policies and processes for managing capital are unchanged from the preceding year.

The Company’s debt and capital structure comprises the following:

2016 2015£’000 £’000

DebtBank loan 21,023 29,708

EquityCalled-up share capital 16,780 16,923Reserves 641,541 460,947

658,321 477,870

Total debt and equity 679,344 507,578

The Company’s capital management objectives are to ensure that it will continue as a going concern and to maximisethe capital return to its equity shareholders through an appropriate level of gearing.

The Board would not expect gearing to exceed 20% of shareholders’ funds. Gearing for this purpose is defined asborrowings used for investment purposes, less cash, expressed as a percentage of net assets.

2016 2015£’000 £’000

Borrowings used for investment purposes, less cash 2,827 10,945Net assets 658,321 477,870

Gearing 0.4% 2.3%

The Board, with the assistance of the Manager, monitors and reviews the broad structure of the Company’s capital on anongoing basis. This review includes:

– the planned level of gearing, which takes into account the Manager’s views on the market;

– the need to buy back equity shares, which takes into account the share price discount;

– the opportunities for issues of new shares; and

– the amount of dividends to be paid, in excess of that which is required to be distributed.


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The Annual General Meeting (“AGM”) of the Company will be held on Wednesday, 25 January 2017 at12.00 noon. The formal Notice of Meeting is set out on page 53.

The following information is important and requires your immediate attention. If you are in any doubtabout the action you should take, you should consult an independent financial adviser, authorised underthe Financial Services and Markets Act 2000. If you have sold or transferred all of your ordinary sharesin the Company, please forward this document with its accompanying form of proxy at once to thepurchaser or transferee, or to the stockbroker, bank or other agent through whom the sale or transferwas effected, for onward transmission to the purchaser or transferee.

Resolution 12 – Directors’ authority to allot shares (ordinary resolution) and Resolution 13 – powerto disapply pre-emption rights (special resolution)The Directors are seeking authority to allot a limited number of unissued ordinary shares for cash without firstoffering them to existing shareholders in accordance with statutory pre-emption procedures.

Appropriate resolutions will be proposed at the forthcoming AGM and are set out in full in the Notice of AGM. Anordinary resolution will be proposed to authorise the Directors to allot shares up to a maximum aggregate nominalamount of £1,675,707 (being 10% of the issued share capital as at the date of the Notice of the AGM). A specialresolution will also be proposed to give the Directors authority to allot securities for cash on a non pre-emptivebasis up to a maximum aggregate nominal amount of £1,675,707 (being 10% of the Company’s issued sharecapital as at the date of the Notice of the AGM). This authority includes shares that the Company sells or transfersthat have been held in Treasury. The Board has established guidelines for Treasury shares and will only reissueshares held in Treasury at a price equal to or greater than the Company’s net asset value (inclusive of current yearincome) plus any applicable costs.

The Directors do not intend to allot shares pursuant to these authorities other than to take advantage ofopportunities in the market as they arise and only if they believe it to be advantageous to the Company’s existingshareholders to do so and when it would not result in any dilution of NAV per share.

If approved, both of these authorities will expire at the conclusion of the AGM in 2018 unless renewed, varied orrevoked earlier.

Resolution 14: Authority to make market purchases of the Company’s own shares (specialresolution)At the AGM held on 28 January 2016, the Company was granted authority to make market purchases of up to25,344,150 ordinary shares of 10p each for cancellation. A total of 1,655,000 shares have been bought back underthis authority and the Company therefore has remaining authority to purchase up to 23,689,150 ordinary shares.This authority will expire at the forthcoming AGM.

The Directors believe it is in the best interests of the Company and its shareholders to have a general authority forthe Company to buy back its ordinary shares in the market as they keep under review the share price discount tonet asset value and the purchase of ordinary shares. A special resolution will be proposed at the forthcoming AGMto give the Company authority to make market purchases of up to 14.99% of the ordinary shares in issue as at thedate of the Notice of the AGM. The Directors will exercise this authority only if the Directors consider that anypurchase would be for the benefit of the Company and its shareholders, taking into account relevant factors andcircumstances at the time. Any shares so purchased would be cancelled or held in Treasury for potential reissue. Ifrenewed, the authority to be given at the 2017 AGM will lapse at the conclusion of the AGM in 2018 unlessrenewed, varied or revoked earlier.

RecommendationThe Board considers that the resolutions relating to the above items of special business are in the best interests ofshareholders as a whole. Accordingly, the Board unanimously recommends to shareholders that they vote in favourof the above resolutions and the other resolutions to be proposed at the forthcoming AGM, as they intend to do inrespect of their own beneficial holdings.


Annual General Meeting – Explanation of Special Business

Notice is hereby given that the Annual General Meeting of Schroder AsiaPacific Fund plc will be held at 31 Gresham Street,London EC2V 7QA on Wednesday, 25 January 2017 at 12.00 noon to consider the following resolutions of whichresolutions 1 to 12 will be proposed as ordinary resolutions and resolutions 13 and 14 will be proposed as specialresolutions:1. To receive the Report of the Directors and the audited Accounts for the year ended 30 September 2016.2. To approve a final dividend of 4.75 pence per share for the financial year ended 30 September 2016.3. To approve the Directors’ Remuneration Policy.4. To approve the Directors’ Annual Report on Remuneration for the year ended 30 September 2016.5. To re-elect Nicholas Smith as a Director of the Company.6. To re-elect Anthony Fenn as a Director of the Company.7. To re-elect Rosemary Morgan as a Director of the Company.8. To re-elect Keith Craig as a Director of the Company.9. To re-elect James Williams as a Director of the Company.10. To re-appoint PricewaterhouseCoopers LLP as Auditors to the Company.11. To authorise the Directors to determine the remuneration of PricewaterhouseCoopers LLP as Auditors to the Company.12. To consider, and if thought fit, pass the following resolution as an ordinary resolution:

“THAT the Directors be generally and unconditionally authorised pursuant to section 551 of the Companies Act 2006(the “Act”) to exercise all the powers of the Company to allot relevant securities (within the meaning of section 551 of theAct) up to an aggregate nominal amount of £1,675,707 (being 10% of the issued ordinary share capital at the date ofthis Notice) for a period expiring (unless previously renewed, varied or revoked by the Company in general meeting) atthe conclusion of the next Annual General Meeting of the Company, but that the Company may make an offer oragreement which would or might require relevant securities to be allotted after expiry of this authority and the Board mayallot relevant securities in pursuance of that offer or agreement.”

13. To consider and, if thought fit, to pass the following resolution as a special resolution:“That, subject to the passing of Resolution 12 set out above, the Directors be and are hereby empowered, pursuant toSection 571 of the Act, to allot equity securities (including any shares held in Treasury) (as defined in section 560(1) of theAct) pursuant to the authority given in accordance with section 551 of the Act by the said Resolution 12 and/or wheresuch allotment constitutes an allotment of equity securities by virtue of section 560(2) of the Act as if Section 561(1) ofthe Act did not apply to any such allotment, provided that this power shall be limited to the allotment of equity securitiesup to an aggregate nominal amount of £1,675,707 (representing 10% of the aggregate nominal amount of the sharecapital in issue at the date of this Notice); and provided that this power shall expire at the conclusion of the next AnnualGeneral Meeting of the Company but so that this power shall enable the Company to make offers or agreements beforesuch expiry which would or might require equity securities to be allotted after such expiry.”

14. To consider and, if thought fit, to pass the following resolution as a special resolution:“THAT the Company be and is hereby generally and unconditionally authorised in accordance with Section 701 of theCompanies Act 2006 (the “Act”) to make market purchases (within the meaning of Section 693 of the Act) of ordinaryshares of 10p each in the capital of the Company (“Shares”) at whatever discount the prevailing market price representsto the prevailing net asset value per Share provided that:(a) the maximum number of Shares which may be purchased is 25,118,850, representing 14.99% of the Company’s

issued ordinary share capital as at the date of this Notice;(b) the maximum price (exclusive of expenses) which may be paid for a Share shall not exceed the higher of;

i) 105% of the average of the middle market quotations for the Shares as taken from the London Stock ExchangeDaily Official List for the five business days preceding the date of purchase; and

ii) the higher of the last independent bid and the highest current independent bid on the London Stock Exchange;(c) the minimum price (exclusive of expenses) which may be paid for a Share shall be 10p, being the nominal value per

Share;(d) this authority hereby conferred shall expire at the conclusion of the next Annual General Meeting of the Company in

2018 (unless previously renewed, varied or revoked by the Company prior to such date);(e) the Company may make a contract to purchase Shares under the authority hereby conferred which will or may be

executed wholly or partly after the expiration of such authority and may make a purchase of Shares pursuant to anysuch contract; and

(f) any Shares so purchased will be cancelled or held in Treasury for potential reissue.”

By order of the BoardFor and on behalf of Registered Office:Schroder Investment Management Limited 31 Gresham Street,Registered Number: 3104981 London EC2V 7QA12 December 2016


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Explanatory Notes to the Notice of Meeting


1. Ordinary shareholders are entitled to attend and vote at the meeting and to appoint one or more proxies, who need not be a shareholder,as their proxy to exercise all or any of their rights to attend, speak and vote on their behalf at the meeting. A proxy form is attached. If you wish to appoint a person other than the Chairman as your proxy, please insert the name of your chosenproxy holder in the space provided at the top of the form. If the proxy is being appointed in relation to less than your full voting entitlement,please enter in the box next to the proxy holder’s name the number of shares in relation to which they are authorised to act as your proxy. Ifleft blank your proxy will be deemed to be authorised in respect of your full voting entitlement (or if this proxy form has been issued inrespect of a designated account for a shareholder, the full voting entitlement for that designated account). Additional proxy forms can beobtained by contacting the Company’s Registrars, Equiniti Limited, on 0800 032 0641 or +44(0) 121 415 0207 for overseas callers, or youmay photocopy the attached proxy form. Please indicate in the box next to the proxy holder’s name the number of shares in relation towhich they are authorised to act as your proxy. Please also indicate by ticking the box provided if the proxy instruction is one of multipleinstructions being given. Completion and return of a form of proxy will not preclude a member from attending the Annual General Meetingand voting in person.On a vote by show of hands, every ordinary shareholder who is present in person has one vote and every duly appointed proxy who ispresent has one vote. On a poll vote, every ordinary shareholder who is present in person or by way of a proxy has one vote for every shareof which he/she is a holder.The “Vote Withheld” option on the proxy form is provided to enable you to abstain on any particular resolution. However it should be notedthat a “Vote Withheld” is not a vote in law and will not be counted in the calculation of the proportion of the votes ‘For’ and ‘Against’ aresolution.A proxy form must be signed and dated by the shareholder or his or her attorney duly authorised in writing. In the case of joint holdings,any one holder may sign this form. The vote of the senior joint holder who tenders a vote, whether in person or by proxy, will be acceptedto the exclusion of the votes of the other joint holder and for this purpose seniority will be determined by the order in which the namesappear on the Register of Members in respect of the joint holding. To be valid, proxy form(s) must be completed and returned to theCompany’s Registrars, Equiniti Limited, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA, in the enclosed envelopetogether with any power of attorney or other authority under which it is signed or a copy of such authority certified notarially, to arrive nolater than 48 hours before the time fixed for the meeting, or an adjourned meeting. Shareholders may also appoint a proxy to vote on theresolutions being put to the meeting electronically at www.sharevote.co.uk. Shareholders who are not registered to vote electronically, willneed to enter the Voting ID and Shareholder Reference ID set out in their personalised proxy form. Alternatively, shareholders who havealready registered with Equiniti’s Shareview service can appoint a proxy by logging onto their portfolio at www.shareview.co.uk and clickingon the link to vote. The on-screen instructions give details on how to complete the appointment process. Please note that to be valid, yourproxy instructions must be received by Equiniti no later than 12.00 noon on 23 January 2017. If you have any difficulties with online voting,you should contact the shareholder helpline on 0800 032 0641 (or +44(0) 121 415 0207 for overseas callers).If an ordinary shareholder submits more than one valid proxy appointment, the appointment received last before the latest time for receipt ofproxies will take precedence.Shareholders may not use any electronic address provided either in this Notice of Annual General Meeting or any related documents tocommunicate with the Company for any purposes other than expressly stated.Representatives of shareholders that are corporations will have to produce evidence of their proper appointment when attending the AnnualGeneral Meeting.

2. Any person to whom this notice is sent who is a person nominated under section 146 of the Companies Act 2006 to enjoy informationrights (a “Nominated Person”) may, under an agreement between him or her and the shareholder by whom he or she was nominated, havea right to be appointed (or to have someone else appointed) as a proxy for the Annual General Meeting. If a Nominated Person has no suchproxy appointment right or does not wish to exercise it, he or she may, under any such agreement, have a right to give instructions to theshareholder as to the exercise of voting rights.The statement of the rights of ordinary shareholders in relation to the appointment of proxies in note 1 above does not apply to NominatedPersons. The rights described in that note can only be exercised by ordinary shareholders of the Company.

3. Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, the Company has specified that only those shareholdersregistered in the Register of members of the Company at 6.30 p.m. on 23 January 2017, or 6.30 p.m. two days prior to the date of anadjourned meeting, shall be entitled to attend and vote at the meeting in respect of the number of shares registered in their name at thattime. Changes to the Register of Members after 6.30 p.m. on 23 January 2017 shall be disregarded in determining the right of any personto attend and vote at the meeting.

4. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so by using theprocedures described in the CREST manual. The CREST manual can be viewed at www.euroclear.com. A CREST message appointing aproxy (a “CREST proxy instruction”) regardless of whether it constitutes the appointment of a proxy or an amendment to the instructionpreviously given to a previously appointed proxy must, in order to be valid, be transmitted so as to be received by the issuer’s agent (IDRA19) by the latest time for receipt of proxy appointments.

5. Copies of the terms of appointment of the non-executive Directors and a statement of all transactions of each Director and of his familyinterests in the shares of the Company, will be available for inspection by any member of the Company at the registered office of theCompany during normal business hours on any weekday (English public holidays excepted) and at the Annual General Meeting by anyattendee, for at least 15 minutes prior to, and during, the Annual General Meeting. None of the Directors has a contract of service with theCompany.

6. The biographies of the Directors offering themselves for re-election are set out on pages 18 and 19 of the Company’s Annual Report andAccounts for the year ended 30 September 2016.

7. As at 12 December 2016, 167,570,716 ordinary shares of 10 pence each were in issue (no shares were held in Treasury). Therefore thetotal number of voting rights of the Company as at 12 December 2016 was 167,570,716.

8. A copy of this Notice of meeting, which includes details of shareholder voting rights, together with any other information as required underSection 311A of the Companies Act 2006, is available from the webpage dedicated to the Company: www.schroderasiapacificfund.com.

9. Pursuant to Section 319A of the Companies Act 2006, the Company must cause to be answered at the Annual General Meeting anyquestion relating to the business being dealt with at the AGM which is put by a member attending the meeting, except in certaincircumstances, including if it is undesirable in the interests of the Company or the good order of the meeting that the question be answeredor if to do so would involve the disclosure of confidential information.

Webpage and share price informationThe Company has a dedicated webpage, which may be found at www.schroderasiapacificfund.com. The webpage has been designedto be utilised as the Company’s primary method of electronic communication with shareholders. It contains details of the Company’sordinary share price and copies of Report and Accounts and other documents published by the Company as well as information on theDirectors, Terms of Reference of Committees and other governance arrangements. In addition, the site contains links toannouncements made by the Company to the market, Equiniti’s shareview service and Schroders’ website. There is also a sectionentitled “How to Invest”.The Company releases its net asset value on both a cum and ex-income basis to the market on a daily basis.Share price information may also be found in the Financial Times and on Schroders’ website at www.schroders.co.uk/its.

ISA statusThe Company’s shares are eligible for stocks and shares ISAs.

Non-Mainstream Pooled Investments statusThe Company currently conducts its affairs so that its shares can be recommended by IFAs to ordinary retail investors in accordancewith the FCA’s rules in relation to non-mainstream investment products and intends to continue to do so for the foreseeable future. TheCompany’s shares are excluded from the FCA’s restrictions which apply to non-mainstream investment products because they areshares in an investment trust.

Financial calendarAnnual General Meeting January

Final dividend paid February

Half year results announced June

Financial year end 30 September

Annual results announced December

Alternative Investment Fund Managers (“AIFM”) DirectiveCertain pre-sale, regular and periodic disclosures required by the AIFM Directive may be found either in this Annual Report or on thewebsite www.schroders.co.uk/its.The Company’s leverage policy and details of limits on leverage required under the AIFM Directive are published on the website atwww.schroders.co.uk/its.

Preferential treatment of investorsThe Company’s investors purchase shares on the open market and therefore the Company is not in a position to influence thetreatment of investors. No investor receives preferential treatment.

Liquidity risk managementThe Company’s shares are traded on the London Stock Exchange through market intermediaries. There are no special rights to redemption.

Periodic and regular disclosure under the Directive(a) none of the Company’s assets are subject to special arrangements arising from their illiquid nature;(b) there are no new arrangements for managing the liquidity of the Company including, but not limited to, any material changes to the

liquidity management systems and procedures employed by the Manager in place. Shareholders will be notified immediately wherethe issue, cancellation, sale and redemption of shares is suspended, when redemptions are suspended or where other similarspecial arrangements are activated;

(c) the current risk profile of the Company and the risk management systems employed by the Manager to manage those risks can befound in the Strategic Review; and

(d) the total amount of leverage employed by the Company may be found in the AIFM disclosures on the websitewww.schroders.co.uk/its.

Any changes to the following information will be provided through a regulatory news service without undue delay and in accordancewith the Directive:(a) the maximum level of leverage which the Manager may employ on behalf of the Company; and(b) the right of re-use of collateral or any changes to any guarantee granted under any leveraging arrangement.

Remuneration disclosuresThe information required under the AIFM Directive to be made available to investors in the Company on request in respect ofremuneration paid by the AIFM to its staff, and, where relevant, carried interest paid by the Company, can be found on the websitewww.schroders.co.uk/its.

Shareholder Information

www.schroderasiapacificfund.com

www.schroders.co.uk/its

Dealing Codes

ISIN: GB0007918872SEDOL: 0791887Ticker: SDP

Global Intermediary Identification Number (GIIN)SWLQRM.99999.SL.826

Alternative Investment Fund Manager (the “Manager”)Schroder Unit Trusts Limited31 Gresham StreetLondon EC2V 7QA

Investment Manager and Company SecretarySchroder Investment Management Limited31 Gresham StreetLondon EC2V 7QATelephone: 020 7658 6501

Registered Office31 Gresham StreetLondon EC2V 7QA

Depositary and CustodianHSBC Bank plc8 Canada SquareLondon E14 5HQ

Lending BankScotiabank Europe PLC201 Bishopsgate6th FloorLondon EC2M 3NS

RegistrarsEquiniti LimitedAspect HouseSpencer RoadLancingWest Sussex BN99 6DAShareholder Helpline: 0800 032 0641*Website: www.shareview.co.uk*Calls to this number are free of charge from UK landlines

Communications with shareholders are mailed to the addressheld on the register. Any notifications and enquiries relating toshareholdings, including a change of address or otheramendment should be directed to Equiniti Limited at theabove address.

Corporate BrokerNumis Securities LimitedThe London Stock Exchange Building10 Paternoster SquareLondon EC4M 7LT

Independent AuditorsPricewaterhouseCoopers LLPChartered Accountants and Statutory Auditors7 More London RiversideLondon SE1 2RT

Advisers

Shareholder enquiriesGeneral enquiries about the Company should be addressed to the Company Secretary at the Company’s Registered Office.

Documents

Schroder AsiaPacific Fund plc - RNS Submit · 2 Schroder AsiaPacific Fund plc Financial Highlights 1Source: Morningstar. 2Source: Thomson Reuters. The Company’s benchmark is the